The central government announced to reduce the import duty on gold from 15% to 6% in Budget 2024-25. Apart from this, the government wants to finalize its decision on the future of Sovereign Gold Bond (SGB).
Status of Gold Industry in India
Gold Reserves in India
- According to the National Mineral Inventory, the total reserves of gold ore in India were estimated at 501.83 million tonnes as of 2015.
- Of the total gold ore reserves found in India, the major reserves are located in Bihar (44%), followed by Rajasthan (25%), Karnataka (21%), West Bengal (3%), Andhra Pradesh (3%), and Jharkhand (2%).
Gold Production in India
- Karnataka contributes about 80% of the country’s total gold production.
- Kolar Gold Fields (KGF) located in Kolar district is considered to be one of the oldest and deepest gold mines in the world.
Gold Imports
- India is the second largest gold consumer in the world.
- India’s gold imports grew by 30% to US$45.54 billion in the financial year 2023-24.
- However, gold imports recorded a significant decline of 53.56% in March 2024.
Sovereign Gold Bond (SGB) Scheme Introduction
- Sovereign Gold Bond (SGB) is a type of government security whose value is determined based on the quantity of gold.
- This scheme was launched by the Government of India on October 30, 2015.
- It aims to provide investors a digital and secure alternative to physical gold.
Key Features of Sovereign Gold Bond Scheme
Valuation and Payment
- The value of SGB is determined based on the quantity of grams of gold. This means that the price of the bond is based on the current market price of gold.
- Investors pay the issue price of the bond, and at the time of maturity the amount of the bond is repaid as per the current price of gold.
Benefits and Maturity
- SGB offers a safe and profitable investment option.
- Any investor in India can avail the benefits on maturity of the bond or through interest received from time to time.
- The maturity period of the bond is determined as per the maturity date and it is redeemed as per the issue price of the bond.
Issuer
- Gold bonds are issued as Government of India stock under the Government Securities (GS) Act, 2006.
- SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Government of India, which ensures the safety and validity of the bond.
Eligibility to invest in Sovereign Gold Bond Scheme
The following are the eligibility criteria to invest in SGBs
- Individual investors: Individuals who are residents of India can purchase the bonds individually, on behalf of a minor child, or jointly with another individual.
- Hindu Undivided Family (HUF): Hindu Undivided Family (HUF) in India can invest in bonds under this scheme as a legal entity.
- Trust: Any legally recognized trust in India can buy bonds under this scheme for
- Educational Institution: Any university or other educational institution in India, which wants to invest its capital in safe and profitable investment, can invest in this scheme.
- Charitable Institution: Any charitable institution that manages funds for social or religious activities can also invest in SGB.
Process of investing in Sovereign Gold Bond Scheme
- SGB is sold only to entities and individuals residing in India.
- This scheme provides investors a digital and secure option instead of holding the physical form of gold, so that their investment can be managed in a safe and transparent manner.
Minimum investment limit
- The minimum investment limit under the Sovereign Gold Bond Scheme is one gram of gold.
Maximum investment limit
- For individual investor: The maximum investment limit for each individual investor is 4 kg of gold.
- For Hindu Undivided Family (HUF): The maximum investment limit for HUF under this scheme is also 4 kg of gold.
- For Trusts and Government Entities: The maximum investment limit under this scheme for any trust or similar entities notified by the Government from time to time is 20 kg of gold.
- In case of joint holding: If any bonds under this scheme are in joint holding, the investment limit up to 4 kg will be applicable only to the first applicant.
Tenure of the bond
- The total tenure of the bond under this scheme is 8 years.
- There will be an exit option on the date of interest payment in the 5th, 6th, and 7th year.