MUMBAI: Putting at rest the concern of the public who invested the sovereign bonds over their reruns after the budget surprisingly slashed the import duty of gold, the Reserve Bank has announced the redemption price at Rs 6938 per gram of gold bonds issued in August 2016.
The SGBs were issued at a price of Rs 3,119 per gram in August 2016. The RBI has set August 5, 2024, as the final redemption date, the monetary authority said in a statement. The final redemption price of sovereign gold bonds (SGBs) will be Rs 6,938 per gram for those bonds issued on August 5, 2016, implying a gain of 122%, the central bank said.
The price of SGBs are fixed on the basis of simple average of closing price of gold of the 999 purity published by the India Bullion & Jewellers Association for the week preceding the subscription period, as per the RBI. The bondholders are offered an annual rate of 2.5%, making the scheme an attractive option. Earlier this week, a senior central government official was quoted as saying in a section of the media the SGB scheme is one of the most expensive instruments to fund the fiscal deficit as the cost of funding fiscal deficit via SGBs was higher than the benefit of reducing dependence on physical gold via the scheme, adding that the scheme is not a social sector scheme, rather an investment plan and that the government would take a “holistic call” on whether to continue with the scheme going ahead.
The official added that the Centre was not looking to replace SGB with an alternate scheme as of now, if they decide to discontinue it.
Recently, there has been some level of anxiety among SGB investors following market corrections after the steep customs duty cut by 9 percentage points to 6%. Investors fear that their investments on the gold scheme may provide diminished returns. However, the revenue secretary Sanjay Malhotra had on July 30 had assured that SGBs would get at least 12% return.