It seems to be like curtains have come down for sovereign gold bonds (SGB) with the Finance Ministry being non-committal on the issuance of the primary tranche for the paper gold in the course of the present fiscal.
“It is a very expensive technique of borrowing and the financial rationale doesn’t allow this as of now,” an official mentioned. The second half borrowing calendar has no point out of SGB.
This comment has been made at a time when the newest redeemed tranche (SGB 2016-17 Collection III – Concern date November 17, 2016) gave a whopping acquire of 159 per cent at maturity on November 16.
In line with a notification from the RBI issued on November 8, the redemption value was set at ₹7,788 per unit. Because of this those that bought this bond on the unique situation value of ₹3,007 per gm in 2016 will realise a revenue of ₹4,781 per gram upon redemption. “It isn’t a social safety scheme. Any determination on recent issuance shall be primarily based on the belief that it shouldn’t simply profit the shopper, however the authorities as effectively,” the official maintained.
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Costly instrument
The final tranche of SGB (FY 2023-24 Collection IV) was issued on February 21. The mixture sum raised throughout 2023-24 amounted to ₹27,031 crore (44.34 tonnes). For the reason that inception of the SGB scheme in November 2015, a complete of ₹72,274 crore (146.96 tonnes) has been raised by means of 67 tranches.
Officers additionally mentioned that due to it being a extremely costly instrument, the variety of points has been coming down. In FY21, there have been 12 issuances, which got here right down to 4 in FY24. There has not been a single situation this fiscal up to now.
The secondary market had a way of there being no determination on the recent tranche and this was mirrored within the very excessive demand for these bonds on this phase over the last couple of months. SGBs are traded on the RBI’s retail direct on-line portal. Buying and selling in SGBs rose in August, with the traded quantity at ₹53 lakh (as on August 26) in opposition to ₹15 lakh for the earlier month (as on July 29) and ₹1 lakh in June (as on June 30, 2024), per knowledge compiled by ARWL from the portal.
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Key issue
The destiny of SGB appears to have been sealed when the federal government lowered import obligation on gold to six per cent from 15 per cent, making bodily gold purchases extra engaging than investments in SGBs.
On the identical time, the second-year issuance of SGBs is nearing redemption, and the expectation is that the federal government must bear increased outgo as gold costs have virtually doubled within the final 8 years.
The truth is, the RBI has already introduced untimely redemption of 30 tranches (issued between Might 2017 and March 2020) to happen between October 1 and March 31, subsequent yr.
