‘Complex, expensive’: Further tranches of sovereign gold bonds unlikely

SGBs: Further tranches of sovereign gold bonds are unlikely, said sources to Business Today TV. SGBs are government securities denominated in grams of gold and are substitutes for physical gold.

According to sources, “SGB is a complex and expensive instrument”.

SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Indian government.

Meanwhile, earlier this month, the RBI announced the final redemption price at Rs 6,938 per gram – 122 per cent higher – for SGBs that were issued on August 5, 2016. The gold bonds were issued at a price of Rs 3,119 in August 2016 by RBI. The final redemption date was August 5.

The price of Sovereign Gold Bonds is based on the average closing price of 999 purity gold as published by the India Bullion and Jewellers Association Limited for the week before the subscription period, according to RBI guidelines. Investors buy SGBs at the issue price in cash and redeem them for cash upon maturity. The central bank issues these bonds on behalf of the government.

SGBs, issued by the government, have an 8-year tenure. The SGB August 2016 issue is reaching maturity, requiring redemption. Unlike the optional redemption by the RBI at the end of the fifth year, this bond's redemption is mandatory.