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SOVEREIGN GOLD BOND SCHEME 2020-21

Focus: GS-III Indian Economy

Why in news?

In terms of Government of India Notification Sovereign Gold Bonds 2020-21 (Series IV) will be opened for the July month.

In order to promote the Digital India campaign Government of India in consultation with the Reserve Bank of India has decided to allow discount of Rs 50 (Rupees Fifty only) per gram from the issue price to those investors who apply online and the payment is made through digital mode.

What are Sovereign Gold Bonds?

  • Sovereign Gold Bonds are government securities denominated in grams of gold. They are substitutes for holding physical gold.
  • Under the Sovereign Gold Bond Scheme, the Reserve Bank of India will issue the bonds on behalf of the Government of India.
  • The bonds will be sold at post offices and banks and issued in denomination of gram.
  • They will issue these bonds on payment of money. Later on, the bonds will be connected to the price of gold.
  • From one person, the Sovereign Gold Bond Scheme would accept a minimum investment of 2 gm gold and a maximum investment of 500 gm in a single fiscal year.

Why is the gold sovereign bond scheme needed?

  • The gold demand rises in times of uncertainty or high inflation and Gold demand is mostly met through imports.
  • Years of high imports are ones of high current account deficits which, in turn, have weakened the rupee.
  • Hence, in order alleviate the deficit issue that rises up due to the demand of gold when people are trying to buy physical gold, the Sovereign bonds work as an alternative option.
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