New Delhi: As part of efforts to cut down gold imports and lower the current account deficit, the government on Monday launched the Sovereign Gold Bond Scheme FY19. The scheme retains the incentives offered in the earlier tranche—of 2.5% interest rate and capital gains tax exemption on redemption.

Sovereign gold bonds will be sold every month from October 2018 to February 2019 through banks, Stock Holding Corporation of India Ltd, designated post offices, and recognized stock exchanges, a finance ministry statement said. The tenor of the bond will be for a period of eight years with exit option in the fifth, sixth and seventh year.

Payment for the bonds can be made through demand draft, cheque and electronic banking, while cash payment is allowed up to a maximum of 20,000.

Gold and crude oil have played a role in India’s widening current account deficit. The government, however, chose not to increase import duty on gold when it raised duty on non-essential imports last month to narrow the current account deficit, fearing a surge in gold smuggling. India’s gold imports were pegged a $33.7 billion in FY18.

The current account deficit had widened to a four-quarter-high at 2.4% of gross domestic product (GDP) in the April-June period on the back of rising crude oil prices, from 1.9% of GDP in the January-March quarter of 2017-18.

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