Government’s gold bond scheme yet to make an impact

The Indian government’s debut effort to introduce gold bond schemes has received a moderate response so far. Today, November 20th is the last day of the gold bond scheme and hopes are that before it closes, there would be more interest shown in it, as per reports.

The government had introduced the gold bond scheme to take away interest in buying physical gold, rather opting for bonds, thereby reducing the country’s dependency on gold imports. It also introduced the gold monetization scheme which came into operations on October 22, to mobilise the idle gold kept in Indian households. The gold bond scheme came into effect on November 5th just prior to the Indian festive season of Diwali. Bonds are being sold through post offices and banks.

With a moderate response, banks have noted that with a short time given between the scheme announcement by the government and its implementation, they could not gather enough time to market the bonds, as such consumer response was low. Also, the central government had fixed the gold bonds issue price at Rs 2,684 per gram, and a fixed interest rate of 2.75 percent and the option to buy bonds worth 2 grams of gold upto the limit of 500 grams. The fixed price by the RBI was a deterrent as gold prices dropped since and reached Rs.25,184 per 10 grams in the beginning of November, as such not attracting much demand by either the investors or advisors, as per reports.

Although the exact figures of the value of investment in the scheme has yet to come in, this first step by the government has left some lessons to be learnt and some new hope that there would be a better implementation the next time around.