RBI to sell gold bonds, an opportunity to own paper gold

MUMBAI: The Reserve Bank of India has opened a new window for selling gold bonds, an opportunity for investors to own the precious metal on paper after jewellery became more expensive following implementation of the Goods and Services Tax.

Investors can apply for the Sovereign Gold Bond 2017-18 – Series II through banks, the stock exchanges, select post offices and the Stock Holding Corporation of India from July 10 to 14, the RBI said in a statement on Thursday.

The tenor of the bonds will be eight years with exit options from the fifth year to be exercised on interest payment dates, the RBI said. Investors will be paid a fixed rate of 2.5 per cent per annum semi-annually on the nominal value of gold.

"The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram,” the central bank said.

While interest income is taxable, there are some exemptions on long-term capital gains.

The issue price of the gold bonds will be Rs 50 per gram less than the nominal value. Investors can purchase the bonds with cash, subject to a limit of Rs 20,000. They can convert their holdings into dematerialised form.

The bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.

"Bonds can be used as collateral for loans. The loan-to-value is to be set equal to ordinary gold loan mandated by the Reserve Bank of India from time to time,” the RBI said.

Institutions distributing these bonds can earn commissions of up to 1% of the subscription. Half of such commissions will be shared with sub-agents.