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SGBs were introduced by the RBI in 2015 as substitutes for physical gold and gold ETFs. Image: livemint
The Government of India may halt the sale of Sovereign Gold Bonds (SGBs) due to concerns about their cost and complexity, CNBC-TV18 reported on Thursday, citing government sources.
Investors have put Rs 72,274 crore into 67 tranches of SGBs, with four tranches fully maturing and funds returned to investors.
The report notes that investors more than doubled their investment in the first four tranches issued between 2015 and 2017.
The recent Union budget revealed that the government owes Rs 85,000 crore to investors, nearly nine times the Rs 10,000 crore owed at the end of March 2020, according to CNBC-TV18.
Demand goes up
Ahead of the official announcement, market demand for gold bonds had increased, with investors paying up to 8% more than the government's trading price as of August 14.
SGBs are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) and are traded through investors' demat accounts. Profits from these sales will incur capital gains tax.
What are SGBs?
Sovereign Gold Bonds (SGBs) are gold-based investment instruments issued by the Reserve Bank of India on behalf of the government. Introduced in November 2015 to reduce gold imports, SGBs are denominated in grams of gold, with one gram as the unit. They have an eight-year holding period, with an option for premature withdrawal after five years.
Individual investors can buy a minimum of 1 gram and a maximum of 4 kilograms. Hindu Undivided Families can purchase up to 4 kilograms, while trusts and similar entities can buy up to 20 kilograms each financial year.
(By arrangement with livemint.com)
