The bonds will be part of the Gold Bond Scheme, approved along with a Gold Monetisation Scheme by the Union cabinet on Wednesday.
The former scheme will have an annual cap of 500g per person and such bonds would be issued for five to seven years. These will be issued in two, five and 10g of gold or other denominations.
The official, who wished to not be named, said the final contours were being discussed with RBI.
The government plans to borrow Rs 6 lakh crore in this financial year, Rs 3.6 lakh crore in the first half. While the overall target might remain unchanged, the issue of other government securities might be adjusted by Rs 15,000 crore to make room for the gold bonds.
The official added the government was gearing up to launch the gold monetisation scheme around Diwali, with an interest rate of 2.5-3 per cent on the deposits. The interest rate on the gold bonds was expected to be two to three per cent.
“We will review the (two schemes) after a year, based on the response,” the official said. The schemes would be notified within two months.