The Sovereign Gold Bonds Scheme announced earlier this year will open on November 5, and subscriptions will be accepted till November 20, the government announced in a statement issued on Friday. The scheme will offer an annual interest rate of 2.75 per cent to domestic investors, it added.’

The new scheme is part of the governement’s efforts to rein in gold imports which had driven the CAD to record highs a couple of years ago. It aims to encourage investors to shift away from the purchase of gold to its paper equivalent.

During the first nine months of 2015, India has emerged as the largest consumer of gold at 682 tonnes, nearly 63 tonnes more than China. Imports have surged, and in Q3 2015 stood at 263 tonnes, up by 23% year-on-year and also the highest quarterly volume year-to-date.

The bonds will be sold from designated banks and post offices from and will be issued by the RBI on November 26. Subsequent tranches will be notified at a later date, the statement from the Finance Ministry said.

The tenor of the bond will be for a period of eight years with exit option from 5th year to be exercised on the interest payment date. The price of the bond will be fixed in rupee terms, on the basis of the previous week's (Monday - Friday) simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. The same procedure would be followed for calculating the redemption price for the bonds.

While the minimum permissible bond should be worth 2 grams of gold, the maximum can be 500 grams.