The subscription for the government’s sovereign gold bond scheme for 2022-23 opened on Monday. The bonds will be issued in denominations of one gram of gold or multiples thereof. One can subscribe to the bonds under the last tranche till Friday and these will be issued to subscribers on March 14.
The government, in consultation with the Reserve Bank of India (RBI), has fixed the issue price of the fourth tranche at Rs 5,661 per gram. The interest on gold bonds will commence from the date of issue and shall be paid at a fixed rate of 2.50 per cent per annum on the nominal value of the bond.
What are sovereign gold bonds?
Sovereign Gold Bonds (SGBs) are government securities denominated in gold with one gram as a basic unit. Such bonds are seen as a viable alternative to owning actual gold.
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The scheme was launched in November 2015 with an aim to reduce the demand for physical gold and shift a part of the domestic savings — used for the purchase of gold — into financial savings. The central bank issues sovereign gold bonds on behalf of the government.
What’s the tenure?
The tenure of the SGB will be for eight years with an option of premature redemption after 5th year to be exercised on the date on which interest is payable.
The bonds will be sold through banks Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges — National Stock Exchange of India Limited and Bombay Stock Exchange Limited.
Is there any discount offered?
Investors who submit their applications online and pay for their investments electronically are eligible for a Rs 50 per gram discount. For such investors, the issue price of the Gold Bond will be Rs 5,561 per gram of gold.
How much can you invest?
The minimum permissible investment is one gram of gold. While the maximum limit of subscription shall be 4 Kg for individuals, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal year (April-March), as notified by the Government from time to time. A self-declaration to this effect will be obtained from the investors at the time of making an application for a subscription. The annual ceiling will include SGBs subscribed under different tranches, and those purchased from the secondary market, during the fiscal year.
If there is a joint holding, the investment limit of 4 Kg will be applied to the first applicant only.
What’s the payment mode?
The payment for the SGBs will be through cash payment (up to a maximum of Rs20,000) or demand draft or cheque or electronic banking. The investors will be issued a Certificate of Holding for the same. The SGBs will be eligible for conversion into demat form. Investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
SGBs can be used as collateral for loans. The loan-to-value (LTV) ratio will be as applicable to any ordinary gold loan, mandated by the Reserve Bank from time to time.