Sovereign Gold Bond Scheme for Investment into 'demat' gold bonds.

 Narendra Modi government has decided to boost the Sovereign Gold Bonds scheme there by shifting part of the estimated 300 tons of physical bars and coins purchased every year for Investment into 'demat' gold bonds. As per official data, there was a growth of 10.47 per cent in India's Gold imports in May. Imports touched $2.42 billion in May. As per the initial draft on the scheme, sovereign Gold Bonds will be issued on payment of money and would be linked to the price of gold . RBI will issue the bonds for the Government. Issuing agency will need to pay distribution costs and a sales commission to the intermediate channels, to be reimbursed by Government. The bond would be restricted for sale to resident Indian entities. The cap on bonds that may be bought by an entity would be at a suitable level, not more than 500 grams per person per year. Government will issue bonds with a nominal rate of interest (which will be linked to international rate for gold borrowing). An indicative lower limit of 2% may be given but the actual rate will have to be market determined. On maturity, the investor receives the equivalent of the face value of gold in Rupee terms. The rate of interest on the bonds will be payable in terms of grams of gold. The interest will be calculated on 10,000 at a certain per cent say 2 or 3%.

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