Definition, positive impact , negative impact.

2. The Government of India has
launched the Sovereign Gold Bonds
Scheme.
In this scheme investors will get
returns that are linked to gold price,
the scheme is expected to offer the
same benefits as physical gold. They
can be used as collateral for loans
and can be sold or traded on stock
exchanges.
INTRODUCTION

3. GOLD BOND SCHEME (BUDGET 2015)
The union finance minister Arun Jaitley has announced
several types of gold bonds for monetizing gold in budget 2015.
 Gold deposit scheme- The customers can deposit
their idle gold under GDS which will provide them
safety, interest earnings, tax benefits and a lot more.
 Sovereign gold bond scheme- It is kind of a
financial instrument to be provided to invest in gold
bonds rather than physical gold.
 Gold coin with Ashok Chakra- Govt. will also
introduce Indian gold coin which will carry Ashok
chakra on its face. This will reduce the demand of
import of coins.

4. SOVEREIGN GOLD BOND SCHEME
FEATURES ARE
 It is an alternative to buying physical gold.
 This scheme is expected to offer the same benefit as
the physical gold.
 Sovereign gold bonds(SGBs) are government
securities denominated in grams of gold.
 They are substitutes for holding physical gold.
Investors have to pay the issue price in cash and the
bonds will be redeemed in cash on maturity.
 The Bond is issued by Reserve Bank on behalf of
Government of India.

5. WHY SOVEREIGN GOLD BOND?
India imports more than 800 tones of gold every
year(world gold council report). More than 90% of our
gold demand is fulfilled by import, so it forms the major
expenditure towards import bill. Importing more and
more gold adds to trade deficit (total value of import-
total value of export), ie more revenue going out of India
which ultimately leads to rise in Current Account
Deficit(CAD). Higher the CAD hampers the economic
growth.

6. HOW DOES SOVEREIGN GOLD BONDS
WORK?
you invest rupees today at the international
price of gold, get an additional two percent (or
a bit more) interest annually, and when you exit
after five or seven years, you get the latest
price of gold plus interest - and the same
capital gains treatment as physical gold assets.

7. IMPLICATIONS
 One, the market risk is yours.
 Two, the scheme will not appeal to those who
want physical gold for jewellery or for future
use
 Three, the two percent interest payable annually
means holding sovereign gold bonds will be
more rewarding than gold ETFs (exchange
traded funds).
 Four, the scheme could appeal to savers who
want physical gold sometime in the future.
 Five, the government will have to bear the
currency and market risks - which means it can
both borrow cheap (if gold prices fall) or
expensively.

8. ELIGIBILITY TO INVEST IN THE
SGBS
 Persons resident in India as defined under
Foreign Exchange Management Act, 1999 are
eligible to invest in SGBs.
 Eligible investors include individuals, trusts,
universities, charitable institutions, etc.
 Minors can also invest but the application on
behalf of the minor has to be made by his / her
guardian.

9. BENEFITS OF SGBS
 The Sovereign Gold Bonds will be available both
in demat and paper form.
 The tenor of the bond is for a minimum of 8 years
with option to exit in 5th, 6th and 7th years.
 They will carry sovereign guarantee both on the
capital invested and the interest.
 Bonds can be used as collateral for loans.
 Bonds would be allowed to be traded on
exchanges to allow early exits for investors who
may so desire.

10.  In Sovereign Gold Bonds, capital gains tax
treatment will be the same as for physical gold
for an 'individual' investor. The department of
revenue has said that they will consider
indexation benefit if bond is transferred before
maturity and complete capital gains tax
exemption at the time of redemption.

11. AIMS OF SGBS
 The scheme aims at reducing the import of gold.
Out of the 1,000 tonnes of gold consumed every
year, most of it is imported. Gold is the second
highest expense on the import bill after oil.
 In the first instalment the government has
proposed that it would issue bonds to the tune of
around 13,500 crore.
 This is almost equal to 50 tonnes of gold.
 It will be issued in denomination of 5,10,50,100
grams of gold or other denomination.

12. MINIMUM AND MAXIMUM LIMIT
FOR INVESTMENT
 The Bonds are issued in denominations of one
gram of gold and in multiples thereof.
 Minimum investment in the Bond shall be two
grams with a maximum buying limit of 500 grams
per person per fiscal year (April – March).
 In case of Joint holding, the limit applies to the
first applicant.

13. AUTHORIZED AGENCIES
SELLING THE SGBS
 Bonds are sold through scheduled commercial
banks Like SBI,PNB etc
 The application form will also be provided by the
designated Post Offices.
 It can also be downloaded from the RBI’s
website. Banks may also provide online
application facility.
 The bonds can also be issued by non-banking
finance companies, National Saving
Certificate (NSC) agents for a fee.

14. CHALLENGES
 Most of us prefer buying physical gold to paper gold.
It would be very challenging to make individuals
switch from buying physical gold to paper which
promises gold like returns.
 The duration of bond can be a very important factor.
 How capital gains on these bonds are treated , is also
a very important factor. ( from taxation point of view)

15. CHALLENGES
 If gold prices rises steeply, banks may get
affected, the repayment burden increases. So,
they may have to cover this risk either by
hedging or by taking insurance cover.
 The minimum tenure of the deposit can be 1
year.
 Banks may have to provide ‘pre-mature’
redemption facility.

16. GOLD BOND SCHEME A HUGE
HIT
 The first tranche of sovereign gold bonds that
closed on November 20 received an encouraging
response despite falling gold prices, suggesting that
the scheme may be successful in reducing imports
of the metal. The scheme, which opened on
November 5, received 63,000 applications for 917
kg of paper gold worth Rs 246 crore. "Excellent
response for an innovative product," Economic
Affairs Secretary Shaktikanta Das tweeted.

17. RBI POSTPONES ISSUE DATE OF SGBS
 Large number of applications has been received
by banks and post offices. To enable smooth
uploading of applications into RBI's e-Kuber
system, particularly by the post offices, it has
since been decided to shift the issue date of the
Sovereign Gold Bond from November 26, 2015
to November 30, 2015.
 RBI further said that as the settlement date has
now been shifted to November 30, the interest at
prevailing savings bank rate "shall be paid" from
the date of realisation of payment to the new
settlement.

18.  Investors will get an annual fixed rate of 2.75 per
cent payable semi-annually on initial value of the
investment.
 They will also get capital gain if price of gold
appreciates while holding the bonds.
 Capital gains will be taxed as in case of physical
gold holdings. A short-term capital gain tax will
apply if you sell within three years.
Benefits for Investors in SGBs

19. BENEFITS FOR
INVESTOR(CONTINUE)
 It will be possible to sell and trade the bonds
on exchange, in case the investor want to
redeem them before maturity.
 Since there is no regular income from
investment in gold, the income will not be
subjected to tax.

20. BENEFITS TO BANKS IN SGBS
 Bank can have another stream of income through
gold monetization deposit scheme.
 Banks have the freedom to set their own interest
rates on the gold deposit.
 Banks can also use the deposited gold to make coins
and sell them to the public.
 There is also a proposal to allow the banks to use
the deposited to meet statutory requirements like
CRR and SLR.

21. THANK YOU
BY
POOJA TAYAL FA15040
SHIPRA GUPTA FA15057
RAJAT BANSAL FA15044
BHAWNA GUPTA FA15014
VAISHALI SINGH FA15059
DEEPAK AGGARWALL FA15019
Jims college sector – 5 Rohini , Delhi