Discount on Sovereign Gold Bond Scheme

Published on July 06, 2019
In News: The Government of India in consultation with the RBI has decided to allow a discount of Rs 50 per gram of gold. The discount is given on the issue price to those investors who apply online and the payment is made through Digital Mode in SGBs
Discount on Sovereign Gold Bond Scheme

Objective: 

  • To digitize the subscription of Sovereign Gold Bond Scheme and increase transparency in payment by the investors

Sovereign Gold Bond Scheme:

  • SGSs are government securities denominated in grams of gold and act as substitutes for holding physical gold.
  • The Bond is issued by RBI on behalf of the Government of India.
  • Aim: To encourage people to buy gold bonds instead of purchasing physical gold
  • The idea is to reduce the import quantity of gold thereby controlling the current account deficit
  • Eligible persons to invest in SGBs include individuals, universities, HUFs (Hindu undivided families) and charitable institutions and all residents in India as defined under Foreign Exchange Management Act, 1999
  • The minimum investment limit of subscription is one gram and the maximum limit is 4 kg for individuals, HUFs and 20 kg for trusts
  • The limit applies to the first applicant in case of joint holding

Benefits:

  • At the time of redemption/premature redemption, the investor gets the ongoing market price for gold
  • The risk and costs of storage are eliminated
  • The market value of gold is assured to the investors at the time of maturity and periodical interest

Drawbacks:

  • Risk of capital loss if the market price of gold declines

Question: 

Q.1 What is the maximum limit for the subscription of the Sovereign Gold Bond Scheme for the first applicant holding a joint account?
a. 4 kg
b. 8 kg
c. 20 kg
d. 1 kg

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