India: Govt’s sovereign gold bond receives deposits worth Rs150 crore
Mumbai-India (Nov 21) The government’ sovereign gold bond product has managed to garner deposits worth over Rs150 crore as on 20 November, two people familiar with the development confirmed.
The deposits largely came from retail customers during this week, said the first of the two people, a public sector banker who spoke on conditions of anonymity.
“The response to the first tranche has been lukewarm and the government will need to rework some of the issues with the structure of the product and the timing before the second tranche is announced,” the banker said.
One big reason for the weak response to the gold bond product was that it was announced only recently and was immediately put on sale, not allowing enough time for banks to market it well.
On 30 October, the government and Reserve Bank of India (RBI), while announcing the details of the scheme, said the bonds would bear an interest rate of 2.75% per annum and would available at banks, post offices and brokerages between 5 November and 20 November. The price of the gold was fixed at Rs2,684 per gram.
“The rate has been fixed on the basis of simple average of closing price for gold of 999 purity of the previous week (26-30 October 2015) published by the India Bullion and Jewellers Association Ltd (IBJA),” the RBI added.
Since the price of gold fell below the value which was decided, customers steered clear of it in the initial sale period.
“We had to explain to customers that this would be a long term deposit product and temporary volatility in gold prices need to be ignored,” the banker mentioned above said.
The government had introduced the sovereign gold bond as part of its efforts to reduce the dependence on physical gold in India.
According to World Gold Council estimates, about 20,000 tonnes of gold is lying in Indian households. The central government also introduced the gold monetisation scheme where individuals can deposit their physical gold in bank branches and earn returns on it.