Published on: December 17, 2022
Sovereign Gold Bonds
Why in news? The Reserve Bank of India announced to issue next tranche of Sovereign Gold Bonds 2022-23 Series III
What is Sovereign Gold Bond (SGB)?
- They are government securities denominated in grams of gold.
- Substitutes for holding physical gold.
- Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity.
- Issuer: Reserve Bank on behalf of Government of India.
- Superior alternative to holding gold in physical form.
- The risks and costs of storage are eliminated.
- Assured of the market value of gold at the time of maturity and periodical interest.
- Free from issues like making charges and purity in the case of gold in jewellery form.
- The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip
- Risks: Risk of capital loss if the market price of gold declines
- Issued in denominations of one gram of gold and in multiples thereof
- Eligible investor:
- Individuals, HUFs, trusts, universities and charitable institutions.
- Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.
- Joint holding is allowed.
- Investment on behalf of the minor has to be made by his/her guardian
- Minimum and maximum limit for investment
- Minimum investment : One gram
- Maximum limit : 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time
- Interest rate : 2.50 per cent (fixed rate) per annum on the amount of initial investment.
- Authorized agencies to sell
- Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks
- Designated Post Offices
- Stock Holding Corporation of India Ltd and the authorised stock exchanges either directly or through their agents.
- They are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC).
- TDS is not applicable on the bond.
- Nomination facility is available as per the provisions of the Government Securities Act 2006 and Government Securities Regulations, 2007.
- The bonds can be held in demat account and are tradable