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Sovereign gold bonds
Why in the news ?
- The government has decided to step up issuance of sovereign gold bonds.
- Government will accept applications from interested investors each month between October and February.
- It is aimed to shift a portion of investment demand towards “paper gold” to trim physical purchases and contain their damaging impact on trade balance.
More in the news
- Applications for the bonds will be accepted for four days each month before the issuance.
- The bonds carry a 2.5 per cent annual interest for investors.
- The government has budgetted to garner as much as Rs 5,000 crore from all the three gold schemes this fiscal.
- The three schemes are :1) The sovereign gold bond2) Gold monetisation scheme3) Indian gold coin
- The government has decided to promote gold bond scheme, conscious of the fact that that hiking the customs duty on gold from the current 10 per cent to trim imports also raises risks of smuggling.
Sovereign Gold Bonds (SGBs)
- SGBs are government securities denominated in grams of gold.
- They are substitutes for holding physical gold.
- Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity.
- The Bond is issued by Reserve Bank on behalf of Government of India.
- As part of efforts to cut down gold imports and lower the current account deficit, the government had launched the Sovereign Gold Bond Scheme.
- The scheme retains the incentives offered in the earlier tranche—of 2.5% interest rate and capital gains tax exemption on redemption.
Source
Indian Express, RBI.