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      Question

      What is the interest rate earned on

      SGBs? Refer to the following information to answer the next 4 questions (Q23 to Q26) The Indian government has introduced a unique investment opportunity linked to the value of gold, aimed at reducing the physical demand for the precious metal and promoting financial savings. This investment option is available in electronic form and is designed to provide both a fixed interest income and the potential for capital appreciation based on the prevailing market price of gold. The bonds can be held by individuals, trusts, and other eligible entities, offering a safer and more cost-effective alternative to holding physical gold. Investors are required to meet certain minimum investment criteria, and the bonds come with a specified tenure during which they are held. These bonds are also eligible for trading on stock exchanges, providing liquidity to investors. Currently, the Reserve Bank of India (RBI) has raised funds equivalent to 139 tonnes of gold through SGBs, which is alarming when compared to the 822 tonnes of gold reserves held by the Central Bank. SGBs now account for 17% of India's gold reserves—a significant portion without physical backing.
      A 1.5% per annum Correct Answer Incorrect Answer
      B 2% per annum Correct Answer Incorrect Answer
      C 2.5% per annum Correct Answer Incorrect Answer
      D 3% per annum Correct Answer Incorrect Answer
      E 4% per annum Correct Answer Incorrect Answer

      Solution

      SGBs offer an interest rate of 2.5% per annum, payable semi-annually.

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