The government will sell gold bonds ahead of the festival season when prices of the precious metal normally rise, putting pressure on the rupee's value. India, the second biggest consumer of physical gold, imports a fair share of it.
The bond sale will happen in five installments.
“The Sovereign Gold Bonds will be issued every month from October 2018 to February 2019," the Reserve Bank of India said in a statement late Monday. The central bank will sell the paper gold on behalf of the government. Bonds will be traded on local stock exchanges.
Last week, the benchmark spot gold traded in the range between $1,184.21 and $1,208.32 per ounce, an elevated level that has prompted many dealers to offer consumer discounts to retain demand.
Price of the bond will be fixed in rupees on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association, on the last three working days of the week before the subscription, the central bank said.
"The investors will be compensated at a fixed rate of 2.50 percent per annum payable semi-annually on the nominal value," the central bank said.
The rupee has been hitting record lows in the past one month with the local unit closing at 74.07 per dollar, a new record low.
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