What is the Sovereign Gold Bond Scheme?                                                        

Decline in Popularity of SGB:

• This speculation follows the Union budget’s decision to slash customs duties on gold and silver from 15% to 6%.
• The reduction in customs duties is expected to decrease demand for SGBs, which has already led to a 2-5% drop in their prices on the National Stock Exchange (NSE).

• Government securities denominated in grams of gold.
• Issued by RBI.

• Denominated in multiples of grams of gold, with a basic unit of 1 gram.
• Tenor of 8 years with an exit option from the 5th year on interest payment dates.

• Minimum: 1 gram of gold.
• Maximum: 4 kg for individuals and HUFs,
  • 20 kg for trusts and similar entities per fiscal year.

• Quantity of gold protected, receiving market price at redemption.
• Eliminates storage risks and costs.
• Assured market value at maturity and periodic interest.
• Free from making charges and purity issues.
• Held in RBI books or demat form, eliminating scrip loss risk.

• Can be used as collateral for loans.
• Loan-to-value (LTV) ratio set equal to ordinary gold loans.

PYQ: 

[2016] What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme’?

1. To bring the idle gold lying with Indian households into the economy
2. To promote FDI in the gold and jewellery sector
3. To reduce India’s dependence on gold imports

Select the correct answer using the codes given below:

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3