Mumbai : Fearful of the impact of the banking crisis in the West, Indian investors flocked to their final tranche of sovereign gold bonds (SGBs) issued by the Reserve Bank of India (RBI) for FY23, taking outstanding bonds above the 100 tonne mark Were staying For the first time since the launch of the scheme in November 2015.
Personal finance experts said incremental inflows into SGBs from gold exchange-traded funds (ETFs) after tax and indexation benefits from debt funds were removed from April 1, will add to the attractiveness of bonds.
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The latest sovereign gold bond issue which ran from March 6 to 10 received investor subscription to the tune of 3.53 tonnes, which is a 22-month high, taking the outstanding bond volume to 101.57 tonnes. at the outstanding value of SGBs Assets under management by MF gold ETF schemes exceed Rs 44,937 crore as of mid-March 21,400 crores by 28 February 2023.
In terms of units subscribed, March’s 3.53 tonnes was the highest since May 2021, when investors subscribed 5.3 tonnes.
The removal of benefits applicable to gold ETFs, among other specified debt schemes, from April 1 could lead to incremental inflows into SGBs, which are exempt from capital gains tax on redemption, though the interest on the bonds is taxable, said Amol Joshi, founder Services as per planned investment.
“Existing loan schemes will not be affected and there is no grandfathering as the new rules are effective from the new financial year (FY24),” Joshi said.
Bankers said since the amendments to the Finance Bill became public only on Friday, investor enthusiasm for gold bonds was driven by the bank crisis in the US and the European Union earlier this month. The metal’s prospects look bright for at least two quarters, he said.
“Given the current interest rate scenario, macroeconomic environment and political uncertainty overseas, gold is one of the best asset classes to invest in, and SGB is the best vehicle to invest in gold if you are in India.” said Shekhar Bhandari, President, Global Transaction Banking, Kotak Mahindra Bank. “The above reasons will keep the prices supported for the next few quarters with a correction likely in 2024.”
To reduce the current account deficit and reduce the pressure on the rupee, the government introduced the revised SGB scheme.
The 2.5% annual coupon, payable half-yearly, is on the issue price and the tenor is 8 years, although early redemption is permitted after the fifth year from the date of issue on coupon payment dates.
Resident Indians are eligible investors as defined under FEMA, 1999. RBI issues bonds on behalf of the government. The minimum investment for individuals is one gram and the maximum is 4 kg in each financial year.
