Gold bonds will be issued by RBI on behalf the government and will have a sovereign guarantee
Prime Minister Narendra Modi
New Delhi: In a major set of economic decisions, the Modi government on Wednesday approved sovereign gold bond and gold monetisation schemes to wean away Indians from the precious yellow metal. Sovereign gold bond has been launched with the intention to prevent people from buying physical gold for investment purpose. GMS will try to fish out idle gold lying with households which is estimated at 20,000 tonne and lending it to jewellers or used for replenishment of RBIs gold reserves.
The government has been trying to wean away Indians from gold as it import few years back had pushed up the current account deficit to dangerous levels. “The Cabinet on Wednesday cleared the Gold Bond scheme. Under this scheme instead of buying physical gold, Indian residents can buy the gold bonds,” said finance minister Arun Jaitley.
Gold bonds will be issued by RBI on behalf the government and will have a sovereign guarantee. The government will decided rate of interest which will take into account the domestic and international market conditions and may vary from one tranche to another. This rate of interest will be calculated on the value of the gold at the time of investment.
The tenor of the bond could be for a minimum of five to seven years, so that it would protect investors from medium term volatility. The principal amount of investment will be redeemed at the price of gold at that time. If the price of gold has fallen, the depositor will be given an option to roll over the bond for three or more years. The investors will need to be aware of the volatility.
( Source : deccan chronicle )
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