Government may close Sovereign Gold Bond Scheme: There is less possibility of new allocation for SGB scheme in the budget, the government is incurring losses from this scheme.

The government may close the Sovereign Gold Bond Scheme. A decision on the Sovereign Gold Bond Scheme can also be taken in the budget to be presented on February 1. Experts believe that this time the possibility of new allocation for the SGB scheme in the budget is very less.

This decision is possible in view of the rising price of gold. CNBC’s Laxman Roy said that in the current year, it has been announced to issue SGB worth Rs 18,500 crore. The government is incurring losses due to 2.5% interest on Sovereign Gold Bond. In such a situation, the Sovereign Gold Bond Scheme is not likely to continue further.

Laxman Roy said that the government believes that Sovereign Gold Bonds were issued with the aim of promoting investment in gold. But due to the rising prices of gold and the interest expense paid on this scheme, the government may close this scheme.

Due to the strong rise in gold prices in the last 3-4 years, the Sovereign Gold Bond Scheme is giving more than double the returns. This is beneficial for the investors, but this scheme is proving to be a loss-making deal for the government.

Sovereign Gold Bond: Started in 2015 with the aim of reducing gold imports.

The Reserve Bank of India launched the Sovereign Gold Bond (SGB) scheme in November 2015 to provide an alternative to physical gold. The objective of this scheme was also to reduce the demand for gold and curb imports.

Investment limit: You can invest in maximum 4 kg gold.

Through SGBs, a person can invest a minimum of 1 gram and a maximum of 4 kilograms of gold in a financial year. In case of joint holding, the investment limit of 4 KG will be applicable on the first applicant only. Whereas the maximum limit of purchase for any trust is 20 kg.

Benefit of investment: No worries about purity and safety, green interest also

There is no need to worry about accuracy in SGBs. The price of Gold Bond is linked to the gold price of 24 karat purity published by the Indian Bullion and Jewelers Association (IBJA). Along with this, it can be kept in the form of demat, which is quite safe and there is no expense on it. It gives 2.5% interest annually and benefits increase as the price of gold increases.

Return on investment: 170% return in 8 years, 2.5% interest compounded every year

When the Sovereign Gold Bond Scheme was launched in 2015-16, its price per gram was Rs 2,684. There was a discount of Rs 50 on this. That is, the price had become Rs 2,634. Currently the price of gold of 999 purity is around Rs 7,000. That means gold has given a return of about 170% in 8 years. Apart from this, interest of 2.5% is also received every year.