Definition
Sovereign Gold Bond Scheme
The Sovereign Gold Bond Scheme lets investors hold gold in paper form as RBI-issued bonds denominated in grams, earning interest plus price-linked returns.
Under the Sovereign Gold Bond (SGB) Scheme, the RBI issues bonds whose value is linked to the price of gold, so investors get exposure to gold without storage or purity worries, plus a fixed rate of interest on the invested amount. They are issued in tranches and can be held to maturity or traded on exchanges.
Gains on redemption at maturity have enjoyed favourable tax treatment, and the bonds reduce demand for physical gold and gold imports. Together with the Gold Monetisation Scheme, SGBs are part of the policy effort to channel gold demand into financial instruments.
Related terms
- Government Securities (G-Sec)Government securities are tradable debt instruments issued by the central or state governments, considered virtually free of credit risk in rupee terms.
- Reserve Bank of India (RBI)The RBI is India's central bank and monetary authority, responsible for issuing currency, setting policy rates, regulating banks and managing the government's debt.
- Gold Monetisation SchemeThe Gold Monetisation Scheme lets households and institutions deposit idle gold with banks to earn interest and bring private gold into the economy.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.