Trading in the fourth tranche of sovereign gold bonds will begin on stock exchanges from Monday, providing investors a greater choice to diversify their portfolio without the need to buy the metal in physical form.
Sovereign Gold Bond Scheme (SGB) will be open for subscription from July 18-22, 2016 for trading members to subscribe to the issue for their clients, BSE and NSE said in separate circulars.
So far, three tranches of the bonds have been issued, amounting to about Rs 1,322 crore.
Sovereign Gold Bonds -- government securities denominated in grams of gold -- offer an alternative to holding gold in physical form. The scheme was announced by the government on October 30, 2015.
The minimum investment size in the secondary market will be as low as 1 gm, while the maximum quantity will be 500 gm.
The bond is issued by RBI on behalf of the government and investors can apply for the bonds at the price as disseminated by RBI.
A mock bidding session would be conducted tomorrow in this regard, BSE said.
"To support the government's objective of providing the investors an alternative to buying physical gold and to encourage members and their client's participation on the exchange, BSE will pass entire one per cent commission received from the RBI to the members for this tranche," BSE added.
NSE said it has decided to share the commission earned by the exchange with the trading members.
A commission of 0.95 per cent will be given to trading members for subscription valued Rs 20 crore, while the commission will be 0.99 per cent for allotment worth more than Rs 20 crore.
To facilitate orderly collection of bids through the stock exchange mechanism, an online bid collection facility will be available to trading members on existing web based e-IPO platform.
Under the scheme, gold bonds are issued in denominations of 5, 10, 50 and 100 grams for a term of 5-7 years with a rate of interest to be calculated on the value of the metal at the time of investment. The scheme has an annual cap of 500 grams per person.
The scheme is aimed at reducing demand for gold in physical form by encouraging people to buy the commodity in demat or the paper form.
NSE and BSE have been appointed by Sebi for acting as receiving office for collecting subscription bids from investors.
