Concept:The Sovereign Gold Bond (SGB) Scheme aims to reduce physical gold demand and is issued by the Reserve Bank of India (RBI) on behalf of the Government of India.
Explanation:The SGB Scheme was launched in November
2015 under the Gold Monetisation Scheme.
Its main purpose is to reduce the country's reliance on physical gold imports, which affect the Current Account Deficit.
Investors hold digital or paper gold linked to the prevailing market price of gold, instead of physical bullion.
The bonds are issued by the RBI, so they carry sovereign backing and the highest safety.
Investors earn a fixed interest rate of
2.50% per annum, paid semi-annually, along with capital gains from gold price appreciation.
The tenure is
8 years, with an early exit option after the
5th year on interest payment dates.
The minimum investment is
1gram, and the maximum limits are
4kg for individuals/HUFs and
20kg for trusts per fiscal year.
SGBs can be used as loan collateral and traded on stock exchanges, offering liquidity.
Answer:The purpose of the Sovereign Gold Bond (SGB) Scheme is to reduce the demand for physical gold, and it is issued by the RBI.