Govt proposes to raise Rs 13,500 crore by sovereign gold bonds | Business Standard News

Govt proposes to raise Rs 13,500 crore by sovereign gold bonds | Business Standard News

MY VIEW:

Online comments posted on June 19, 2015:

This
is one of the three gold-related schemes announced in the current year’s budget
by Finance Minister Arun Jaitley. The other two being gold deposit scheme to be
operationalised through banks and issue of indigenous gold coins. While the
other two schemes have ‘gold-content’, the Sovereign Gold Bonds Scheme(SGBS),
on the face of it gives an impression that the scheme will only re-designate a
part of GOI’s market borrowing programmes as SGBS.
For
the investor, SGBS offers all the positives of investing in solid gold plus an
incentive by way of interest. Still, as there is no underlying gold supporting
the ‘gold bonds’, as in the case of Gold ETFs, the scheme will only serve as a
conduit for government borrowing direct from public.
Though
there is nothing wrong in trying out a new instrument, the absence of
gold-backing may impact credibility of the scheme. A way-out could be a promise
to increase gold component in the country’s gold reserves to the extent funds
are mobilised through SGBS. For the purpose, the scheme may have to be delinked
from GOI’s market borrowing programme and implemented directly by RBI.


M G Warrier, Mumbai

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