The gold, currently valued at over Rs 200 crore and owed to around 50 different parties, is being withheld by the Reserve Bank at the instance of the CBI, which is investigating the bondholders. The 1993 gold bond scheme provided immunity from inquiry and prosecution to all investors.

Say sources closely tracking the case, "The CBI has given strict and clear instructions to the Reserve Bank of India to stop repayments to those gold bondholders against whom investigations are pending." These cases include investors from regions like Delhi, Calcutta and Patna, among other centres.

The RBI acted as merchant banker to the Government for the gold bond scheme floated in 1993. The Centre mopped up about 41 tonnes of gold from 1,488 applicants. The scheme attracted investors primarily because it provided immunityfrom prosecution under the wealth tax, gift tax, income tax, customs, Fera and Foreign Contribution (Regulation) Acts.

The returns under the scheme were modest: the central bank paid a lump sum interest of Rs 40 per gm of gold on the redemption of the bond -- a return of less than 2 per cent per annum.

Under the scheme, investors were not required to disclose the nature and source of acquisition of the gold deposited with the RBI. "No inquiry or investigation shall be commenced against any subscriber under any of the said Acts on the ground that such subscribers hold the gold bond," the Gold Bonds (Immunities and Exemptions) Ordinance, 1993, stipulated.

The scheme, however, does not provide immunity under the Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act and the Terrorist and Disruptive Activities Act and the Prevention of Corruption Act.

In order to facilitate proper repayments, the redemptions of the gold bonds were to be made in the highest denominations of gold bars anddiscs.

The RBI had made arrangements for gold bars in the denomination of 10, 50, 100 and 500 gm and gold discs of one, two and five gm of 0.995 fineness. The RBI floated a `gold bond repurchase scheme' in 1996 which came to an end in November 1997.

Through the scheme, the central bank offered investors a sum equal to the market value of gold at that time. However, the scheme was not successful as only 651 investors opted for it. In fiscal 1999, the-BJP led coalition Government announced another gold-based investment scheme in the form of `gold deposits'.

However, the scheme has not taken off as the nominated banks allowed to float the scheme are currently waiting for broad guidelines from the Centre.

Through the gold bond scheme 1999, the Centre aims to monetise at least 12,000 tonnes of idle gold reserves lying with the household sector.