SGBs may be sold on tap like MFs; 50-tonne annual demand likely

STOCK MARKET - In its new avatar, as approved by the Union Cabinet on Wednesday, the Sovereign Gold Bonds (SGBs) scheme is expected to be a success. SGBs on-tap (whenever investors want to invest without waiting for a new tranche announcement) availability increases investment options like in the case of mutual funds (MFs).

Investors can buy bonds like systematic investment plans (SIPs), make recurring deposits of bonds through post offices, choose to buy when they have liquidity and prices are lucrative, and gift it on occasions.

BSE MD & CEO Ashish Chauhan said, "It is a welcome move. There was a demand by investors to increase the limit from 500 gram per annum, which has now been made 4 kg. Similarly, the on-tap framework will make it easy for people to subscribe when they want. Market making will provide liquidity to investors. Overall, this will increase the attractiveness of investments in SGB."


On how bonds can be sold on tap, he explained, "On tap is possible like mutual fund selling using exchange infrastructure. At the time the bonds are issued to the investor, the same can be listed as additional bonds. Technology is available with exchanges to provide this platform."

Chauhan is very optimistic about the future of SGBs in their new avatar. He said, "The SGB product has the potential to reduce India's trade deficit by $15 to 20 billion per annum." Market making and improving the liquidity of bonds listed will be the key to success.

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