The Cabinet onA�WedA�raised the annual investment limit in Sovereign Gold Bonds (SGBs) toA�4A�kgA�per individual fromA�500gmA�and relaxedA�differentA�normsA�to createA�themA�a lot ofA�attractiveA�toA�buyers.
The ceilingA�are going to beA�counted onA�financial yearA�basisA�and canA�includeA�the SGBs purchasedA�throughoutA�tradingwithin theA�secondary market,A�an officerA�statementA�sameA�onceA�the cabinetA�meeting here.
According to the statement, the investment limit perA�financial yearA�has beenA�increasedA�toA�4A�kgA�for people,A�4A�kgA�for Hindu Undivided Family (HUF) andA�20A�kgA�for trusts and similar entities notified byA�the govt.A�from time to time.
The ceiling on investment will not include the holdings kept as collateral by banks and financial institutions. “SGBs will be available ‘on tap’. Based on the consultation with NSE, BSE, banks and Department of Post, features of product to emulate ‘on tap’ sale would be finalised by Finance Ministry,” it said.
To improve liquidity and tradability of SGBs, it said appropriate market making initiatives will be devised.
Specific changes have been made in the attributes of the scheme to make it more attractive, mobilise finances as per the target and reduce the economic strains caused by imports of gold and reduce the Current Account Deficit (CAD), it said.
Flexibility has been given to the Finance Ministry to design and introduce variants of SGBs with different interest rates and risk protection or pay-offs that would offer investment alternatives to different category of investors, it said.
“Such flexibility will be effective in addressing the elements of competition with new products of investment, to deal with very dynamic and sometimes volatile market, macro-economic and other conditions such as gold price,” it said.
SGB scheme was notified by the government on November 5, 2015 after due approval of the Cabinet. The main objective of the scheme was to develop a financial asset as an alternative to physical gold.
The target was to shift part of the estimated 300 tonnes of physical bars and coins purchased every year for investment into ‘demat’ gold bonds.
The target mobilisation under the scheme wasA�Rs.A�15,000 crore in 2015-16 andA�Rs.A�10,000 crore in 2016-17. The amount so far credited in the government account isA�Rs.A�4,769 crore.
In view of less than expected response to the scheme, and considering its bearing on CAD and overall macro-economic health of the country, it was felt necessary to make changes in this scheme to make it a success.