By Paul Ploumis 09 Sep 2015 Last updated at 08:21:52 GMT
The Indian cabinet has given final approval to the Sovereign Gold Bond Scheme and Gold Monetization Scheme.
NEW DELHI (Scrap Monster): The Indian government on Wednesday announced the launch of much-awaited Sovereign Gold Bond Scheme and Gold Monetization Scheme. The Cabinet has given final nod to the gold schemes proposed during the annual budget last year. The schemes aim to reduce gold’s demand in physical form and to mobilize tonnes of idle gold lying with Indian households and temple trusts.
Announcing the Cabinet decision, Indian Finance Minister Arun Jaitley noted that consumers could now buy gold bonds instead of buying physical gold. He further added that gold monetization scheme is aimed at people holding idle gold, who could now deposit the same in banks for short, medium or long term. Depositing idle gold with authorized agencies will insure customers from gold’s price fluctuations and earn additional interest on deposits.
Through Sovereign Gold Bond Scheme, investors could obtain gold certificates from the government, which can later be encashed for money or physical gold. The rate of interest of these bonds will be calculated based on the value of gold deposited at the time of investment. The scheme would be issued to retail gold investors in denominations of 2, 5, 10 grams and other sizes of gold. In order to protect the deposits from gold price volatility, the tenure of the bond will be fixed at minimum 5 to 7 years.
Similarly, gold monetization scheme is being introduced with the ultimate aim of mobilizing tonnes of yellow metal stashed in Indian households and temple vaults. It aims to reduce foreign exchange outflows by cutting down gold imports into the country. In longer term, gold monetization scheme will reduce the country’s overdependence on imported gold. The gold mobilized under the scheme will be used to replenish RBI’s gold reserves. It will also be used for making India Gold Coin.