In an effort to bring out the huge amount of gold in the country, the Govt. has introduced the scheme and this borrowing through gold bonds will form a part of the market borrowing programme of the government. The bonds will be issued by the Reserve Bank. 

It may be recalled that the gold bond scheme has been announced to give an alternative to consumers in place of physical gold.  The minimum permissible bond should be worth 2 grams of gold, and the maximum can be 500 grams.  The Sovereign Gold Bonds will be open for public subscription from November 5 to 20th. The bonds will be eventually issued on November 26. The Sovereign Gold Bonds will offer an interest rate of 2.75%. The interest will be payable semi-annually on the initial value of investment. There would also be a commission of 1% on the subscription amount for distribution of bonds.

 The bonds will be sold through banks and designated post offices as may be notified by the Finance Ministry. 

Other important things about the scheme are that the tenor of the bond will be for a period of eight years with exit option from 5th year to be exercised on the interest payment dates.  The price of the bond will be fixed in rupee terms, on the basis of the previous week’s simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. The same procedure would be followed for calculating the redemption price for the bonds.