<div>Of the two gold schemes cleared by the government, the Sovereign Gold Bond (SGB) scheme may have a higher chance of succeeding and would potentially cut India’s gold import bill, says a Nomura report.<br> </div><div>According to the Japanese brokerage firm, “the SGB scheme may have a higher chance of succeeding, as it is sovereign- backed and provides an attractive investment option for households that would like to hold gold as part of their investment portfolio and earn a coupon along the way”.<br> </div><div>Annual investment demand for gold is estimated at 300 MT per annum, which is around 35 per cent of India’s gold import bill ($34 billion in fiscal year 2014-15).</div><div><br>“If some of this can be substituted by the SGB, then it could potentially cut India’s gold import bill,” Nomura said in a research note.</div><div> </div><div>In the second half of this fiscal year (October-March), the government plans to issue Rs 15,000 crore worth of SGBs.</div><div> </div><div>“If successful, this should lower the government’s market borrowing (since SGBs will be within the fiscal deficit) and the gold import bill by a similar amount ($2.2 billion),” Nomura added.</div><div> </div><div>On gold monetisation scheme, Nomura said, participation by households and temple trusts will be a challenge.</div><div> </div><div>Moreover, “temple trusts have historically stayed away from similar gold schemes. Also, since household jewellery will be converted into gold bars and coins, this may not be as attractive a proposition. Moreover, households with large gold deposits may be wary of tax scrutiny,” it said.</div><div> </div><div>“Overall, we think the sovereign gold bond scheme is more likely to succeed, and the gold monetisation scheme less so,” the report said.</div><div>Sovereign gold bonds, are aimed at people buying the precious metal as an investment.</div><div> </div><div>Such bonds will be issued in denominations of 5 grams, 10 grams, 50 grams and 100 grams for a term of five years to seven years with a rate of interest to be calculated on the value of the metal at the time of investment.</div><div> </div><div>However, there will be a cap of 500 grams that a person can purchase in a year. Such bonds will be offered to only Indian citizens and institution while the securities will be traded on exchanges to allow early exit for investors.</div><div> </div><div>Through the Gold Monetisation Scheme, approved by the Union Cabinet, gold in any form can be deposited with banks for a period of 1-15 years that will earn interest while redemption will be at the prevailing value at the end of the tenure.<br><br>(PTI)</div>
