You may get to convert gold bars into bonds

  • Mahua Venkatesh, Hindustan Times, New Delhi
  • Updated: Jun 19, 2015 23:52 IST

This Diwali, you may get an option to buy specially minted Indian gold coins with the Ashok Chakra embossed on it. Separately, you may also get an option to buy government-backed “sovereign gold bonds (SGBs)”, which aim to shift part of the estimated 300 tonnes of physical gold bar purchased every year to dematerialised (demat) gold bond.

These bonds will be marketed through post offices and brokers on a commission basis, according to a discussion paper on the scheme, for which comments are invited till July 2.

“The launch of the gold coin is expected before Diwali as demand for gold during that period is always at a peak,” a senior government official told HT.

The bonds will be issued in 2, 5, 10 grams of gold or other denominations, it said, adding that the tenure of the bond could be for a minimum of 5-7 years so that it would protect investors from medium-term volatility in prices.

Based on current market price, issuance of gold bonds equivalent to 50 tonnes would be Rs 13,500 crore. The tax treatment will likely be the same as for physical gold.

Last month, the finance ministry released the draft of the gold monetisation scheme (GMS), which will allow households to park family jewellery with banks and earn tax-free interests on the value of their yellow metal stock.

Finance minister Arun Jaitley had first announced the government’s intent to launch such a coin, a monetisation and a bond scheme in his 2015-16 budget speech, to mobilise the estimated 20,000 tonnes of gold held by households and institutions.

This is part of the government’s overall plans to dig deep into thousands of tonnes of gold stocked by millions of Indian families, as part of a bigger plan to channelise idle assets for productive use, and reduce costly bullion imports.

In 2014, total investment demand for gold moderated to 180 tonnes from an average annual demand of 345 tonnes during 2010 to 2013.

“It will represent 27% of the 2014 investment demand and result in a saving of $2 billion on gold imports at current prices,” said Sonal Varma, analyst at broking firm Nomura.

The special gold coins are likely to be of 5 to 10 grams. Initially, 20,000 such coins will be mitted and later scaled up depending on the product’s demand.

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