Draft Sovereign Gold Bond Scheme
THE Finance Minister in his budget speech for 2015-16 made the following announcement:
"India is one of the largest consumers of gold in the world and imports as much as 800-1000 tonnes of gold each year. Though stocks of gold in India are estimated to be over 20,000 tonnes, most of this gold is neither traded, nor monetized. I propose to… develop an alternate financial asset, a Sovereign Gold Bond, as an alternative to purchasing metal gold. The Bonds will carry a fixed rate of interest, and also be redeemable in cash in terms of the face value of the gold, at the time of redemption by the holder of the Bond."
Accordingly, a draft outline of the Scheme has been prepared. Comments and views are invited on the draft scheme by 2nd July, 2015.
The outline of the Sovereign Gold Bond Scheme is only at the draft stage and is being released to obtain public opinion. The scheme as it stands at this stage, does not imply any commitment from the government.
Salient Features of the Scheme:
++ Sovereign Gold Bonds will be issued on payment of money and would be linked to the price of gold.
++ Bonds will be issued on behalf of the Government of India by RBI.
++ The Government will issue bonds with a nominal rate of interest (which will be linked to international rate for gold borrowing). An indicative lower limit of 2% may be given but the actual rate will have to be market determined. On maturity, the investor receives the equivalent of the face value of gold in Rupee terms.
++ The bonds will be issued in denominations of 2, 5, 10 grams of gold or other denominations.
++ The tenor of the bond could be for a minimum of 5 to 7 years so that it would protect investors from medium term volatility in the gold prices.
++ Bonds to be easily sold, traded on commodity exchanges.
++ Bonds to have a sovereign guarantee.
++ In order to ensure wide availability the bond will need to be marketed through post offices and by various brokers/agents who may need to be paid a commission (like for Kisan Vikas Patra).
++ Based on the current market price, issuance of gold bonds equivalent of 50 tonnes would be around Rs. 13,500 crore. Since the amount is not very high, it can be accommodated within the market borrowing programme for 2015-16.
Comments/suggestions are invited on the draft text which can be accessed by clicking on the following link: http://mygov.nic.in