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Sovereign Gold Bond Scheme

Topics Covered: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Sovereign Gold Bond Scheme

What to study?

For Prelims: Features of the SGB scheme.

For Mains: The scheme and its significance for India.

Context: Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds.

About the Sovereign Gold Bond Scheme:

  • The sovereign gold bond was introduced by the Government in 2015.
  • Government introduced these bonds to help reduce India’s over dependence on gold imports.
  • The move was also aimed at changing the habits of Indians from saving in physical form of gold to a paper form with Sovereign backing.

Key facts:

Eligibility: The bonds will be restricted for sale to resident Indian entities, including individuals, HUFs, trusts, universities and charitable institutions.

Denomination and tenor: The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The tenor will be for a period of 8 years with exit option from the 5th year to be exercised on the interest payment dates.

Minimum and Maximum limit: The minimum permissible investment limit will be 1 gram of gold, while the maximum limit will be 4 kg for individual, 4 kg for HUF and 20 kg for trusts and similar entities per fiscal (April-March) notified by the government from time to time.

Joint Holder: In case of joint holding, the investment limit of 4 kg will be applied to the first applicant only.

Collateral: Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.

Insta Links:

Prelims Link:

  1. Eligibility for scheme?
  2. Can they be used as collateral?
  3. What is the minimum and maximum permissible limit?
  4. Who can issue these bonds?

Mains Link:

Discuss the key features and significance of Sovereign Gold Bond Scheme.

Sources: pib.