Stock Market

BSE begins mock trading for sovereign gold bonds

BSE begins mock trading for sovereign gold bonds

Leading stock exchange BSE has begun conducting mock bidding session for the sixth tranche of Sovereign Gold Bonds (SGB) scheme, which is expected to be issued later this month by the government.

The Finance Ministry had last month said the sixth tranche of SGB is expected to be issued around the third week of October, prior to Diwali. This tranche is expected to come up with additional features to attract consumers even more.

“Trading members and custodians are hereby informed that the exchange shall conduct mock bidding session of Sovereign Gold Bonds Scheme (tranche six) on the iBBS live platform from Tuesday, October 18, 2016 onwards,” BSE said in a circular.

The mock bidding will take place at an issue price of Rs 3,119 per grams of gold.

Sovereign gold bonds provide investors a choice to diversify portfolio without the need to buy the metal in physical form.

The SGB scheme was announced by the government on October 30, 2015. These bonds are issued by the RBI on behalf of the government.

The tenure of the bonds is eight years with an exit option from fifth year to be exercised on the interest payment dates.

The bonds carry an interest rate of 2.75 per cent (fixed rate) per annum on the amount of initial investment.

Interest is to be paid half-yearly and the last interest will be payable on maturity, along with the principal.

The government has garnered at least Rs 820 crore through the fifth tranche of Sovereign Gold Bond (SGB) scheme.

This was mobilised through over 2 lakh applications representing around 2.37 tonnes of gold.

Previously, the government had mobilised Rs 921 crore from the 4th tranche.

The aim of SGB is to reduce demand, including through imports, for physical gold, thereby reducing the Current Account Deficit.

Three tranches of SGB scheme were floated in 2015-16.

In the current financial year, two tranches have been launched (4th tranche from July 18-22, 2016 and 5th tranche from September 01-09).

As per the government, the SGB scheme is increasingly becoming popular amongst general public due to advantages it offers over physical gold.