What are the features of Sovereign Gold Bonds? And how does the scheme help in the economic welfare of the country.

Sovereign Gold Bonds: Sovereign Gold Bond Scheme launched by Government, under Gold Monetisation Scheme. Under the scheme, the issues are made open for subscription in tranches by Reserve Bank of India (RBI) in consultation with Govt. of India. RBI Notifies the terms and conditions for the scheme from time to time. The salient features of Sovereign Gold Bonds are as under: They are issued by Reserve Bank India on behalf of the Government of India. The Bonds are denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The tenor of the Bond is 8 years with exit option in 5th, 6th and 7th year, which can be exercised on the interest payment dates. Minimum permissible investment is 1 gram of gold. The maximum limit of subscribed is 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal year (April-March) notified by the Government from time to time. A self-declaration to this effect obtained by the issuing authority. In case of joint holding, the investment limit of 4 KG is applied to the first applicant only. RBI issue Press Release stating issue price of the Bond before new issue. Presently the price of Bond is fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited (IBJA) for the last 3 business days of the week preceding the subscription period. Payment for the Bonds is through cash payment (up to a maximum of ₹ 20,000) or demand draft or cheque or electronic banking. The Gold Bonds issued as Government of India Stocks under Government Security Act, 2006. The investors get Holding Certificate for the same. The Bonds are eligible for conversion into Demat form. The redemption price is Indian Rupees based on simple average of closing price of gold of 999 purity of previous 3 working days published by IBJA. The investors can be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value. Bonds can be used as collateral for loans. The Loan-To-Value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time. The lien on the bond shall be marked in the depository by the authorised banks. Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the Reserve Bank of India. The Sovereign Gold Bonds scheme will reduce the massive gold imports into the country every year. Gold imports are the second biggest commodity imports into India after oil. As such, reduction in gold imports will positively affect the larger economy by reducing the Current Account Deficit (CAD).