Question: What is Sovereign Gold Bond scheme? Explain the objectives and potential benefits of the scheme.
Answer: Sovereign Gold Bond scheme is a debt instrument scheme in which individual invests in gold bond instead of physical gold. The bonds are issued by the RBI and opens during specific period for individuals to subscribe.
Features of Sovereign Gold Bond scheme
- Any individual who is a resident in India, Hindu undivided families, trusts, universities and charitable institutions can invest in the scheme.
- The bonds are sold through banks, Stock Holding Corporation of India Limited (SHCIL), post offices, and recognised stock exchanges of the country.
- The pricing will be the simple average of the closing price of goldof 999 purity for the last three working days of the week preceding the subscription period.
Objectives of the scheme
- Source of investment
The scheme is a source of investment for people who are planning on a risk-free option having assured returns on their investment.
- Reduce gold import
This scheme will prevent import of physical gold in the country. It will save our foreign reserves and keep the prices in control for a longer time.
Benefits of the scheme
- Highly liquid
The gold bonds are highly liquid with easy monetization. Individual can exit the scheme and get cash for their investments.
- Easy to handle
Storing gold bonds is easy compared to handling physical gold. The bonds are free from getting stolen when compared to physical gold.
- Assured interest
Apart from the normal rise in prices, investors of gold bond will get a fixed interest on their investment. This is an assurance of higher returns.
Thus, Sovereign Gold Bond scheme is a suitable option for the government as well as citizens. It will help in shoring up funds for government projects.