Why in news? The Reserve Bank of India announced to issue next tranche of Sovereign Gold Bonds 2022-23 Series III

Highlights

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.

Benefits

1. Superior alternative to holding gold in physical form.
2. The risks and costs of storage are eliminated.
3. Assured of the market value of gold at the time of maturity and periodical interest.
4. Free from issues like making charges and purity in the case of gold in jewellery form.
5. 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:

1. Individuals, HUFs, trusts, universities and charitable institutions.
2. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.
3. Joint holding is allowed.
4. Investment on behalf of the minor has to be made by his/her guardian

• Minimum and maximum limit for investment

1. Minimum investment : One gram
2. 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

1. Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks
2. Designated Post Offices
3. 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