Government of India to issue Sovereign Gold Bonds 2017-18 (Series I); Application submission from 24 Apr. to 28 Apr. 2017 and Issuance/ Allotment on 12 May 2017
Government of India, in consultation with RBI, will issue Sovereign Gold Bonds Scheme 2017-18 Series I, applications for which shall be accepted from 24 Apr. to 28 Apr. 2017 and the Bonds will be issued on 12 May, 2017.
The Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange.
Features of Sovereign Gold Bonds Scheme 2016-17 (Series I)
|1||Product name||Sovereign Gold Bond 2017-18 – Series I|
|2||Issuance||To be issued by Reserve Bank India on behalf of the Government of India.|
|3||Eligibility||The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.|
|4||Denomination||The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.|
|5||Tenor||The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.|
|6||Minimum size||Minimum permissible investment will be 1 gram of gold.|
|7||Maximum limit||The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.|
|8||Joint holder||In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.|
|9||Issue price||Price of Bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period. The issue price of the Gold Bonds will be Rs. 50 per gram less than the nominal value.|
|10||Payment option||Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.|
|11||Issuance form||The Gold Bonds will be issued as Government of India Stocks under GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into demat form.|
|12||Redemption price||The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.|
|13||Sales channel||Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices as may be notified and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.|
|14||Interest rate||The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.|
|15||Collateral||Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.|
|16||KYC Documentation||Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.|
|17||Tax treatment||The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond|
|18||Tradability||Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.|
|19||SLR eligibility||The Bonds will be eligible for Statutory Liquidity Ratio purposes.|
|20||Commission||Commission for distribution of the bond shall be paid at the rate of 1% of the total subscription received by the receiving offices and receiving offices shall share at least 50% of the commission so received with the agents or sub agents for the business procured through them.|
Operational Guidelines of RBI
Application forms from investors will be received at branches during normal banking hours from April 24, 2017 to April 28, 2017. Receiving Offices need to ensure that the application is complete in all respects as incomplete applications are liable to be rejected. Relevant additional details may be obtained from the applicants, where necessary. The Receiving Offices may make arrangements to enable the investors to apply online, in the interest of better customer service
Joint holding and nomination
Multiple joint holders and nominees (of first holder) are permitted. Necessary details may be obtained from the applicants as per practice.
Know-Your-Customer (KYC) requirements
Know-Your-Customer (KYC) norms shall be the same as that for purchase of physical form of gold. Identification documents such as passport, Permanent Account Number (PAN) Card, Voter’s Identity Card, Aadhaar card shall be required. In case of minors only, the bank account number may also be considered as valid for KYC verification. KYC will be done by the issuing banks/SHCIL offices/Post Offices/agents.
Interest on application money
Applicants will be paid interest at prevailing savings bank rate from the date of realization of payment to the settlement date, ie. the period for which they are out of funds. In case the applicant’s bank account is not with the receiving bank, the interest has to be credited by electronic fund transfer to the account details provided by the applicant.
Cancellation of application is permitted till the closure of the issue, i.e., April 28, 2017. Part cancellation of submitted request for purchase of gold bonds is not permitted. No interest on application money needs to be paid if the application is cancelled.
As the bonds are government securities, lien marking, etc. will be as per the extant legal provisions of Government Securities Act, 2006 and rules framed there under.
Printing Certificates of Holding
Holding Certificate needs to be printed in colour on A4 size 100 GSM paper.
Servicing and follow up
Receiving Offices, i.e., branches of the Scheduled Commercial Banks, designated post offices, SCHIL and stock exchanges (NSE Ltd and BSE) will “own” the customer and provide necessary services with regards to this bond e.g. update contact details, receive requests for premature encashment, etc. Receiving Offices will be required to preserve applications till the bonds are matured and are repaid.
The Bonds shall be eligible for trading within a fortnight of the issuance on a date as notified by the RBI. (It may be noted that only bonds held in demat form with depositories can be traded in stock exchanges).