Sovereign Gold Bond Scheme – What does draft guidelines say?

Sovereign Gold Bond SchemeSovereign Gold Bond Scheme – What does draft guidelines say?

Govt. of India has issued draft guidelines for Sovereign Gold Bond scheme couple of days back. These bonds are issued on payment of money and are linked to price of gold which earns you additional interest. These Gold Bonds would be available in Banks, PO and NBFC’s soon. What is this Sovereign Gold Bond Scheme? What are the features of Sovereign Gold Bond Scheme? Who is eligible to invest in these Gold Bonds?

What is Sovereign Gold Bond Scheme?

These are bonds issued by Govt of India on payment of money and carries a rate of interest. These are as good as holding gold in your hand, but gives you additional interest at maturity. It is like you buy NSC in Post office and hold a certificate. However, instead of rupee, you hold gold in grams, on paper.

Also Read: What are the benefits of Gold Monetization Scheme in India?

What are the features of Sovereign Gold Bond Scheme?

  • On behalf of Govt. Of India, RBI would issue these bonds to the general public.
  • The nominal rate of interest would be paid per annum at maturity. The minimum rate of interest would be 2%.
  • At maturity, the investor receives an amount in Rupees equivalent to the value of gold.
  • Interest is paid in terms of gold. E.g. if interest is 2% per annum and invested for 5 years, 10% (2% x 5 Yrs) equivalent amount of gold would be paid at maturity for the interest part. Not clear whether interest would be cumulated or simple interest would be paid.
  • Gold prices would be taken from NCDEX or London Bullion Market or from RBI.
  • Banks / Post Offices / NBFC’s can collect money on behalf of Govt. of India and redeem such Sovereign Gold Bonds at maturity. Means these would act as intermediary to issue bonds and repay back to investors.
  • 2, 5 and 10 grams of gold denomination bonds would be issued.
  • Tenure of Sovereign Gold Bonds is 5 to 7 years.
  • Bonds can be traded on stock exchanges. If buyers are available, these can be easily liquidated on the same day.
  • KYC Norms would be similar to that of buying physical gold.
  • Capital gain tax would be similar that of physical gold.

Who is eligible to invest in Sovereign Gold Bond Scheme?

Any Resident Indian / Resident Entities are eligible to invest in this gold bond scheme.  However, one can invest a maximum of 500 grams per person per year.

Who would issue Sovereign Gold Bonds?

These bonds would be issued by RBI on behalf of Govt. of India. However, these are issued through banks, post offices and Non-Banking Finance Companies (NBFC’s) who would collect money for issuing bonds and also help in redeeming such bonds.

What are the objectives of Sovereign Gold Bond Scheme?

Govt. of India thinks that this gold bond scheme would reduce physical gold demand in the market. Beyond this, every year, gold lovers are purchasing around 300 tonnes of gold in the form of gold bars and gold coins. These can be converted into demat gold bonds with such scheme. Govt. of India targets 50 tonnes of gold worth Rs 13,500 Crore through this scheme now. However, all these are draft guidelines and further fine tuning of this gold bond scheme is expected.

Also Read: Gold Loan Vs Personal Loans – Which is cheaper and Better option?

Conclusion: There are critics who believe that in future, gold is wealth and these schemes are promoted by Govt. Of India to reduce imports of gold and no use for the common man. Like I indicated in my earlier article on the Gold monetization scheme, if your objective is to accumulate gold for future consumption like for daughter marriage, instead of buying physical gold, you can invest in these Sovereign Gold Bond Scheme. You can get additional interest beyond the accumulation of gold in rupee terms. However, if your objective is just to invest and get higher returns, look for other Best Investment Plans.

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Sovereign Gold Bond Scheme

Suresh KP


  1. Hi Suresh,

    Need your advice regarding gold investment.
    Is this a right time to invest in Gold ETF? If so which ETF is good?
    Goldman Sachs Gold Exchange Traded Scheme is a right choice to invest?

      1. Thank you Suresh… I have seen your article. It really helps a lot. Is the GS Gold Bees is good to invest?

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