The Saga of Sovereign Gold Bonds

10 September 2016 | 2019 Views | By Mint2Save

There is an un-controllable lust for having gold (the precious noble metal) in any of many a physical forms like ornaments, coins, utensils, biscuits, rods and slabs in the heart and mind of every individual or family in India. And, to co op with this demand, we make a huge import of the gold from gold-exploring countries spending enormous money in the form of foreign exchange in the shape of dollars. This does make a heavy dent in the foreign exchange storage of Govt. of India.
To curb/abate the spending of foreign exchange for import of the `Gold`, to reduce the risk of loss on account of robbery, snatching, theft etc., and, to mobilise the money blocked in this form other wise a very appropriate and judicious step has been taken by the Govt. Of India by issuing `Gold Bonds`.

The scheme of gold bonds gives an excellent opportunity to the investor to purchase the gold in paper form without a dent in the value of gold otherwise kept in physical form. The advantages and salient features of the gold bonds can be understood and realised by the facts put forth as here under:-

The scheme opens for a limited period, called as tranches. The pricing for each tranche in decided on the average market price of gold for past 3 months.
The paper form of the gold(i.e. gold bonds) is having least risks of snatching, theft,robbery etc.
To make it more safe and secure, these bonds can be converted in to electronic form with the Depository participants (e.g. Stock Holding Corporation of India Ltd., Banks dealing in such business etc.)
The so converted bonds are listed and tradable in stock exchanges(BSE and NSE) like other shares.
The gold bonds can be used as collaterals while availing loan.
The gold bonds are issued for a period of 8 years but can be redeemed in 5th,6th and 7th year(an option to exit).
The bonds shall fetch the value equivalent to the prevailing market value.
The Govt. of India shall pay interest @ 2.75 per annum on half yearly basis.
The value of gold bonds received on maturity shall be free from any capital gain tax.
These bonds can be used as an excellent way of making gift in weddings and other occasions.
These gold bonds can be purchased from Post Offices, Branches of authorised Banks, counters of Stock Holding Corporation of India Ltd.

These gold bonds shall prove to be an effective tool in curbing the accumulation of `black money` which can otherwise be got converted into physical form of gold.
Also, it removes the threats of being snatched, robbed, lost, undervalued (attainment of lower value than to purchase value) and so on, keeping the value of gold intact through out.

Therefore, keeping in mind about the contribution in the enhancement of National Economy and abatement of illegal & illegitimate economic practises and accumulation of black money. Further, for any one seeking gold as a method for investment, these bonds would prove a viable solution as :

1 . The investment is safe.

2. There is no question regarding purity.

3. Unlike physical gold, it would reap interest at regular intervals.

4. No extra charges like making charges, processing fee etc are required to be paid in paper gold. Thus no unnecessary investment is needed.