The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, today gave its approval for introduction of the Sovereign Gold Bonds Scheme, as announced in the Union Budget 2015-16.
The scheme will help in reducing the demand for physical gold by shifting a part of the estimated 300 tons of physical bars and coins purchased every year for Investment into gold bonds. Since most of the demand for gold in India is met through imports, this scheme will, ultimately help in maintaining the country’s Current Account Deficit within sustainable limits.
The issuance of the Sovereign Gold Bonds will be within the government’s market borrowing programme for 2015-16 and onwards. The actual amount of issuance will be determined by RBI, in consultation with the Ministry of Finance. The risk of gold price changes will be borne by the Gold Reserve Fund that is being created. The benefit to the Government is in terms of reduction in the cost of borrowing, which will be transferred to the Gold Reserve Fund.
The salient features of the scheme are:-
i. Sovereign Gold Bonds will be issued on payment of rupees and denominated in grams of gold.