This Gold Bond scheme to be discontinued by Government


At a post-Budget media briefing on February 1, Finance Minister Nirmala Sitharaman said that the Sovereign Gold Bond (SGB) program, which was introduced in 2015 as a substitute for actual gold, would be withdrawn. Concerns regarding the program's effect on present investors and potential market repercussions were raised when the government stated that the high borrowing costs of the bonds were the primary cause for their termination. 


Why Government has Discontinued?

Ajay Seth, the secretary of economic affairs, clarified that the SGB program was first intended to decrease gold imports and raise money from the market. However, SGBs have evolved into a costly borrowing instrument for the government. No fresh tranches have been released this fiscal year, even though the FY25 Budget allocated ₹18,500 crore to SGBs, which is less than the ₹26,852 crore in the interim Budget


The SGB plan, which was introduced in November 2015, gave investors an interest-bearing investment option as an alternative to holding actual gold. The bonds have an 8-year maturity duration, and after 5 years, they can be partially redeemed. The interest rate was first set at 2.75% annually and then changed to a fixed rate of 2.5% throughout the duration of the bond.


Impact on Existing Investor

 Current SGB holders will continue to receive their rewards even though the plan will no longer accept new investments. The government has affirmed that redemptions will take place in accordance with the original plan and that existing bonds will continue to pay the guaranteed 2.5% yearly interest until maturity. SGBs are still marketable on the secondary market through stock exchanges for investors who wish to sell before they mature.


Since its inception, total issuances under the SGB scheme have reached ₹45,243 crore as of FY23, with an outstanding value of approximately ₹4.5 lakh crore recorded by March 2023. The discontinuation primarily affects prospective new investors.

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Sovereign Gold Bonds- 2016 Series-II

Government of India has vide its Notification F.No. 4(19)-W&M/2014 dated March 04,2016 announced that the Sovereign Gold Bonds, 2016 (“the Bonds”) will be open for subscription from March 8, 2016 to March 14, 2016. The Government of India may, with prior notice, close the Scheme before the specified period. The terms and conditions of the issuance of the Bonds shall be as follows:

The  Reserve  Bank  of  India  (RBI)  has  issued  a  notification  on  third  tranche  of Sovereign Gold Bonds, 2016, dated March 04, 2016.  Applications for the bond will be accepted from  March 8, 2016 to March 14, 2016.  Copy attached for your ready reference.
In this connection, Shri Shaktikanta Das, Secretary DEA during the video conference held  on  March  03,  2016  with  Chief  Executives  of  various  banks,  RBI  and  IBA, requested the banks  to make their best efforts to reach out to potential customers to invest in the third tranche of Sovereign Gold Bonds.

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