The Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds. The Sovereign Gold Bonds are going to be issued in six tranches from May to September 2021.
The Series-I or first tranche of Sovereign Gold Bond Scheme 2021-22 is going to be open for subscription from May 17, 2021, to May 21, 2021, and these bonds are going to be issued on May 25.
“The nominal value of the bond is based on the simple average closing price for gold of 999 purity, works out to ₹4,777 per gram of gold,” the RBI said.
In consultation with the RBI, the government of India has decided to offer a reduction of ₹50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode. For these investors, the issue price of the gold bond will be ₹4,727 per gram of gold,” the RBI stated.
Before buying Sovereign Gold Bond, let’s understand Sovereign Gold Bond –
What is Sovereign Gold Bond?
Sovereign Gold Bonds( SGBs) are government securities denominated in grams of gold with a minimum unit of 1 gram. They are the substitutes for holding the physical gold. Investors need to pay the issue price in cash, and bonds will be redeemed in cash at the time of maturity. The Reserve Bank of India issues the Bond on behalf of the Government of India.
Who can buy SGB?
Sovereign Gold Bond can be bought by Individuals, HUFs, Trusts, Charitable Institutions and Universities.
Minimum investment in the Bond will be one gram with a maximum limit of subscription of 4 Kg for individuals and HUF respectively, and 20 Kg for trusts and other entities
Where to buy SGB?
Bonds will be sold through branches or offices of Nationalised Banks, Scheduled Private Banks, Post Offices, Stock Holding Corporation of India Ltd, Scheduled Foreign Banks, and the authorized stock exchanges either directly or through their agents.
What are the benefits of buying SGB?
– Sovereign Gold Bond provides capital appreciation to investors, as well as GOI gives 2.50% per annum interest on the SGBs, payable semi-annually on the initial investment. The bond tenure is for eight years, with an exit option being available in the 5th, 6th, and 7th year on the dates of interest payment.
– SGB offer a superior alternative to holding gold in physical form that eliminates the risks and costs of storage.
– Investors too are assured of the market value of gold at the time of maturity and periodical interest as the RBI issues it.
– SGBs offer a superior alternative to holding gold in physical form that eliminates the risks and costs of storage. The bonds are held in the books of the Reserve Bank of India or Demat form eliminating the risk of loss of scrip also.
SGBs offer a superior alternative to holding gold in physical form that eliminates the risks and costs of storage.
Risks in investing in SGB?
There can be a risk of capital loss if the market price of gold decreases. However, the investor does not lose units of gold that he has purchased.