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Only Indian residents will be allowed to subscribe to the proposed Sovereign Gold Bond scheme which is likely to have an annual cap of 500 grams per person, the Finance Ministry has said.
The Budget 2015—16 had proposed to launch a Sovereign Gold Bond (SGB) scheme to develop a financial asset as an alternative to gold.
“Subject to the approval of the scheme by the competent authority, it has been proposed that the SGBs would be restricted for sale to resident Indian entities.
“The cap on bonds that may be bought by an entity has been proposed to be not more than 500 grams per person per year,” Minister of State for Finance, Jayant Sinha said in a written reply to a question in Rajya Sabha.
The proposed scheme, which aims to shift part of the estimated 300 tonnes of physical gold bar purchased every year to demat gold bond, will be marketed through post offices/ banks/NBFCs for a fee.
“The SBGs are expected to carry a fixed rate of interest,” Sinha said.
The loan to value ratio would be equal to ordinary gold loan mandated by RBI from time to time.
The bonds will be issued in 2, 5 and 10 grams of gold or other denominations and the tenor of the bond could be for a minimum of 5—7 years so that it would protect investors from medium—term volatility in gold prices.
In the Budget speech, Finance Minister Arun Jaitley had said, “Though stocks of gold in India are estimated to be over 20,000 tonnes, most of this gold is neither traded, nor monetised.
“I propose to... develop an alternative financial asset, a Sovereign Gold Bond, as an alternative to purchasing metal gold.”
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