Sovereign Gold Bond Scheme - SGBs Cross 100 Tonne Mark | Testbook

What is a Gold Bond?

A Gold Bond is a government initiative in collaboration with the Reserve Bank of India. It aims to decrease the demand for physical gold as the escalating import of gold is hindering the country's growth and investment. A substantial amount of physical gold in the form of gold bars and coins is stored in Indian households as savings. The Sovereign Gold Bond Scheme seeks to convert this physical gold into financial savings through gold bonds. The tenure of these gold bonds is 8 years, with an option for early withdrawal after 5 years on interest payment dates.

The Sovereign Gold Bond Scheme was launched as part of the Gold Monetisation Scheme in 2015. The Gold Monetisation Scheme was introduced to supersede the existing Gold Deposit Scheme (GDS) of 1999. The scheme allows gold depositors to earn an annual interest of 2.25% for a short-term deposit ranging from one to three years.

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Who is eligible to apply for the Sovereign Gold Bond Scheme?

The Sovereign Gold Bond Scheme can be availed by individuals who fall under the following categories:

• As per the Foreign Exchange Management Act, 1999, an individual must be an Indian resident to meet the eligibility criteria under the Gold Bond Scheme.
• Any individual, association, trust, or HUF with Indian residency is eligible to invest in the Sovereign Gold Bond scheme. Joint investments in these gold bonds are also permissible under the scheme.
• The benefits of this scheme can also be extended to minors, provided the bond is purchased by their parents on their behalf.

Government schemes form an important part of the UPSC syllabus. Aspirants must familiarise themselves with the objectives and activities of these major schemes for the IAS exam.

Advantages of the Sovereign Gold Bond Scheme

• The Sovereign Gold Bond Scheme allows for flexible gold denomination in terms of purchasing gold. These gold bonds are available in multiple weight denominations, starting from 1 gram.
• The gold bonds can be issued either in paper or in demat form, as per the convenience of an individual.
• The scheme also provides flexible investment, where one can choose the amount he/she wants to invest.
• The interest provided for the gold bond is 2.50% per annum, which can be paid semi-annually on the nominal value.
• The tenor of the Bond will be for a period of 8 years, with an exit option in the 5th, 6th, and 7th year, to be exercised on the interest payment dates.
• Investors can gift or transfer the gold bonds invested by them to others who are eligible under the scheme. They can also trade these bonds on stock exchanges subject to notifications by the Reserve Bank of India.
• These Gold bonds can be purchased through multiple payment modes such as cheques, cash, DDs, or electronic transfer.

Candidates should stay updated with the latest developments in Current Affairs related to other government schemes for their UPSC 2022 preparation.

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