RBI offers 'Diwali' Discount, cuts interest in sixth tranche

RBI offers 'Diwali' Discount, cuts interest in sixth tranche

The price per gram of gold is Rs 2957 after discount, while the interest rate was reduced to 2.50 percent from 2.75 percent.

The sixth installment of Sovereign Gold Bond (GBS) Scheme comes with a disadvantage for investors in the form of lower interest rates, even if there is a discount of Rs 50 per gram on the price of the bond. The issue will open for subscription from 24 October to 2 November 2016, the Reserve Bank of India (RBI) said in an announcement.
The interest rate stands reduced to 2.50 percent this time of 2.75 percent set for the previous installments, a move that could affect the response of investors. The issue of the bond price will be Rs 2,957 per gram after the Rs 50 discount

The nominal value of the bond was set based on the simple average closing price for gold of 999 purity of the previous week (October 17-21, 2016) published by the India Bullion and Jewellers Association Ltd. (IBJA), which works out to be Rs 3007 per gram, "said the RBI.
. "The Government of India in consultation with the Reserve Bank of India has decided to offer a discount of Rs 50 per gram on the nominal value of the Sovereign Gold Bond Therefore, the issue price was fixed at Rs 2957 / -., "he added.
The fifth tranche launched last month sparked two lakh applications for 2.370 kg of gold, resulting in a collection of about Rs 820 crore. The question was open from 1 to 9 September 2016 and the price has been fixed at Rs 3,150 per gram of gold, the highest till date.
Highlights of the sixth tranche
* The bonds will be limited to the sale to resident Indian entities, including individuals, HUF, trusts, universities and charitable institutions.
* The content of the Bond will be for a period of 8 years with the 5th year of output option to be exercised on the interest payment dates.
* The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April to March). A self-declaration to this effect will be obtained.
* Payment of the Bonds will be by cash payment (to a maximum of Rs 20,000) or draft or by check or electronic bank.
* The redemption price will be based Indian rupees (Monday to Friday) from the previous week simple average of the closing prices of gold purity of 999 published by IBJA.
* Investors will be paid a fixed rate of 2.50 percent per annum, payable semi-annually on the nominal value.
* Interest on the gold obligations shall be taxable according to the provision of the tax law on income, 1961 (43 of 1961). The tax on capital gains arising from the redemption of SGB an individual has been exempted. The benefits of indexation will be provided with long-term capital gains arising from any person on the transfer of obligations.
* The bonds will be traded on the stock market within a fortnight of the show to a date as notified by RBI.
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