GS Mains Model Question & Answer : Examine the impact of Sovereign Gold bond scheme in the Indian economy ? Bring out the recent changes forwarded by the Govt to woo investers. Comment

 GS Mains Model Question & Answer : Examine the impact of Sovereign Gold bond scheme in the Indian economy ? Bring out the recent changes forwarded by the Govt to woo investers. Comment

Q. Examine the impact of Sovereign Gold bond scheme in the Indian economy ? Bring out the recent changes forwarded by the Govt to woo investers. Comment

Model Answer:

Examine the impact of Sovereign Gold bond scheme in the Indian economy ? Bring out the recent changes forwarded by the Govt to woo investers.

The Bonds are issued by the Reserve Bank of India on behalf of the Government of India. The bonds are distributed through banks and designated post offices. This should make subscribing to the bonds an easy affair.
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity.

Benefit and Impact:

The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.

To help reduce India’s over dependence on gold imports.

Changing the habit of Indians from saving in physical form of gold to paper form with sovereign backing.

Recent changes:

Increase in the limit: to 4 kg from 0.5 kg for individuals HUF and 20 kg for trusts.

Flexibility: in the scheme to design and introduce variants to cater to a cross section of investors.

This was probably done to encourage high net worth individuals , rich farmers as well as Trusts to invest in these bonds.

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