India is the largest importer of gold in the world which mainly caters to the demand of the jewelry industry. India imports around 800 to 900 tonnes of gold every year. According to the Commerce Ministry data, gold imports, which have an impact on the country's current account deficit (CAD), fell 14.23% to $ 28.2 billion during 2019-20. In the year 2018-19, the import of this yellow metal was $ 32.91 billion.
These figures show that the Indian government spends a large amount of foreign currency only on the import of gold, so the government has started a scheme like 'Sovereign Gold Bond' so that foreign currency can be saved.
The Sovereign Gold Bond Scheme is a gold bond scheme to invest in gold, which is issued by the Reserve Bank of India (RBI) on behalf of the Government of India. The main objective of this scheme is to reduce the physical demand for gold so that India's gold imports can be reduced. In this scheme, gold bonds are issued to the investor and the bonds can be redeemed in cash after maturity.
Sovereign gold bonds can also be purchased for Rs. And will be valued in different grams of gold. The minimum investment in the bond will be made from 1 gram whereas the upper limit of investment for a person has been fixed at 4 kg.
Sovereign gold bonds were issued by the Government of India in November 2015 under the Gold Monetization Scheme.
Who can invest in gold bonds?
A person who invests in a Sovereign Gold Bond can reside in India, he can be a bondholder for his own self, jointly with another person or even buy this gold bond on behalf of a minor. is.
It should be noted that a person residing in India is defined under Section 2 (v) read with Section 2 (u) of the Foreign Exchange Management Act, 1999. It may also have a university, charitable institution or a trust as a bondholder.
Benefits of investing in Sovereign Gold Bonds: -
1. Sovereign gold bonds can be used as collateral for taking loans.
2. These bonds can be traded in exchanges so that investors can exit before time even if they want.
3. The quantity of gold for which the investor pays is safe because the payment is made to the investor according to the present value of the gold or the price at the time of maturity.
4. These bonds are issued by the Reserve and hence investors can avoid the risk that the company issuing the bonds should not go bankrupt or run away.
5. They also provide freedom from the fear of theft of gold.
6. Making charge is taken at the time of making gold jewelry and there is also a concern about the purity of the gold. This problem has also been overcome by these bonds.
7. In addition, to an increase in gold prices, the investor also gets additional interest at the rate of 2.5%.
8. Investments made in it are tax free on maturity.
The fifth series of sovereign gold bonds for the financial year 2020-21 has been opened to investors from August 3 to August 7. This time the government has fixed the issue price for gold bonds at Rs 5,334 per gram i.e. Rs 53,340 per 10 grams. There will also be a discount of 50 rupees per gram for those who buy gold bonds online. Hence the issue price for online investors will be Rs 52,840 per 10 grams.
Hopefully, by reading this article, you will have understood why the government had started the Sovereign Gold Bond Scheme and what are the benefits to investors by investing in this scheme.