Skip to main content

What are Sovereign Gold Bonds?

Want to invest in Gold but without taking the risks associated with physical gold? Then, Sovereign Gold Bond is the best option.

Sovereign Gold Bonds (SGBs)

SGBs are issued by Reserve Bank of India (RBI) on behalf of the Government of India. They are issued as Government of India Stock in accordance with Section 3 of Government Securities Act, 2006.

Sellers and investors of SGBs

SGBs are sold through ‘Receiving Offices’ such as Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE). 

Eligible investors include individuals (including minors), HUFs, trusts, universities and charitable institutions. 

Subscribing to SGBs

  • SGBs are denominated in multiples of 1 gram. 
  • Minimum investment in SGBs – 1 gram.
  • Maximum limit for subscribing to SGBs – 4 Kg for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per financial year (April-March). The annual ceiling includes SGBs subscribed under different tranches during initial issuance by Government and those purchased from the Secondary Market (for eg. through stock exchanges).
  • In case of joint holding, the investment limit of 4 Kg is applied to the first applicant only.

Tenor of SGBs

  • The tenor of SGBs is 8 years with an exit option after 5th year. 
  • The request for pre-mature redemption is to be submitted by the investor at least 10 days before the next interest payment date. 
  • On maturity and in case of premature redemption, SGBs are redeemed in Indian Rupees. 

Fixing price of SGBs

  • Price of SGB is fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association (IBJA) Limited for the last 3 working days of the week preceding the subscription period. 
  • The issue price of SGBs is less by ₹50 per gram for those investors applying online and making payment through digital mode.
  • The redemption price is fixed in Indian Rupees based on simple average of closing price of gold of 999 purity, of previous 3 working days published by IBJA Ltd.

Payment for SGBs

Payments for SGBs can be made in Indian Rupees through cash (up to ₹20,000) / cheque / demand drafts / electronic banking. 

Financial benefits of SGBs

  • SGBs earn interest at a fixed rate of 2.50% p.a. payable semi-annually on the nominal value (amount of initial investment). The interest on SGBs is taxable as per the provision of Income Tax Act, 1961.
  • The capital gains tax arising on redemption of SGBs to an individual is exempted.
  • The indexation benefit is provided to long term capital gains arising to any person on transfer of SGBs.
  • SGBs can be used as collateral for loans. The Loan to Value (LTV) ratio is same as applicable to any ordinary gold loan.

Holding SGBs

SGBs can be held in any of the following forms –

  1. Bond Ledger Account (BLA)
  2. RDG Account with RBI
  3. Demat account with Depositories viz NSDL / CDSL

The holder of SGBs may convert the bonds from BLA to RDG account / de-materialised form.

SGBs acquired by the banks through the process of invoking lien / hypothecation / pledge alone, can be counted towards Statutory Liquidity Ratio (SLR).

Transfer / trading of SGBs

  • SGBs can be traded in the secondary market through stock exchanges.
  • SGBs are transferable before maturity to eligible transferees wholly / in part by execution of an instrument of transfer (Form F), in case of SGBs held in BLA.
  • In case of SGBs held in demat account with NSDL / CDSL, ownership of dematerialised SGBs can change through trading in stock exchanges / off market transactions.

Commission to Receiving Offices for distribution of SGBs

Commission for distribution of SGBs is paid at the rate of 1% of the total subscription received by the receiving offices and receiving offices are required to share at least 50% of the commission so received with the agents / sub agents for the business procured through them.

Application and documentation for SGBs

  • Applications (Form A) can be submitted to the Receiving Offices at the branches directly / through agents. 
  • Every application must be accompanied by ‘PAN details’.
  • On receipt of complete application, an acknowledgement receipt (Form B) is issued.
  • On the date of allotment, the “Certificates of Holding” (Form C) are issued to the subscribers. 
  • The investor can nominate maximum 2 persons (Form D) or cancel an existing nomination (Form E). 

Redressal of investor’s complaints 

The process for redressal of investor’s complaints is as follows –

  • Nodal officers of Receiving Office is the first point of contact for attending to the queries / complaints of their customers.
  • The investor may approach RBI at sgb@rbi.org.in if the reply is not received from the Receiving Office within 1 month of lodging the complaint or the investor is not satisfied with the response of the Receiving Office.


References

Reserve Bank of India. (2021, October 21). 'Sovereign Gold Bond Scheme 2021-22'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52440

Reserve Bank of India. (2021, October 22). 'Sovereign Gold Bond Scheme of the Government of India (GoI) - Procedural Guidelines - Consolidated'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12181&Mode=0


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Payment of Agency Commission to Agency Banks (ABs) and Disbursement of Government Pension by ABs

Reserve Bank of India (RBI) has issued guidelines on the conduct of Government business by Agency Banks (ABs), payment of agency commission to ABs and disbursement of Government pension by ABs. Who are ABs? ABs mean all Public Sector Banks (PSBs), scheduled Private Sector Banks (PVBs), scheduled Payments Banks (PBs), and scheduled Small Finance Banks (SFBs) appointed by the RBI under Section 45 of the RBI Act, 1934, by mutual agreement, to carry out Government banking business of the Central Government (CG) / State Governments (SGs). What is agency commission? Agency commission means the remuneration paid by the RBI to an AB in consideration of it acting as an agent of the RBI in the conduct of general banking business of the CG and the SGs at the places and in the manner specified in the agreement between the RBI and the bank, with the exception of the functions relating to the management of the public debt. What are the guidelines on appointment of ABs? Any eligible bank which intend...
Post a Comment
Read more

Deposits between a person resident in India and a person resident outside India

Reserve Bank of India (RBI) has updated the regulations on deposits between a person resident in India and a person resident outside India. What are the restrictions on deposits between a person resident in India and a person resident outside India? No person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India. However, the following deposits are exempted – Deposits held in rupee accounts maintained by foreign diplomatic missions and diplomatic personnel and their family members in India with an authorised dealer. Deposits held by diplomatic missions and diplomatic personnel in special rupee accounts namely Diplomatic Bond Stores Account to facilitate purchases of bonded stocks from firms and companies who have been granted special facilities by customs authorities for import of stores into bond. The funds in the account may be repatriated outside India without the approval of the RBI. Deposits held in accounts maintained in foreig...
Post a Comment
Read more

Credit Derivatives

Reserve Bank of India (RBI) has issued directions on credit derivatives. What is Credit Derivative? Credit derivative means a derivative contract whose value is derived from the credit risk of an underlying debt instrument or an index of underlying debt instruments. What is Credit Default Swap (CDS) and Total Return Swap (TRS)? Credit Default Swap (CDS) means a credit derivative contract in which one counterparty (protection seller) commits to pay to the other counterparty (protection buyer) in the case of a credit event with respect to a reference entity and in return, the protection buyer makes periodic payments (premium) to the protection seller until the maturity of the contract or the credit event, whichever is earlier. Total Return Swap (TRS) means a credit derivative contract under which one counterparty (total return payer) commits to transfer the entire economic performance of a reference asset to the other counterparty (total return receiver), and, in return, receives a pre-d...
Post a Comment
Read more

Credit Cards and Debit Cards

Reserve Bank of India (RBI) has issued directions on issuance of credit cards and debit cards. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Non-Banking Financial Companies (NBFCs) for all layers – NBFC-Investment and Credit Companies (NBFC-ICC) NBFC-Factor  NBFC-Micro Finance Institutions (NBFC-MFI)  Housing Finance Company (HFC)  What is a credit card? Credit Card is a physical / virtual payment instrument issued with a pre-approved revolving credit limit that can be used to purchase goods and services or draw cash advances. What is a debit card? Debit Card is a physical / virtual payment instrument linked to a Savings Bank / Current Account which can be used to withdraw cash, make online payments, do Point of Sale (PoS) terminal / Quick Response (QR) code transactions, fund transfer, e...
Post a Comment
Read more

Lead Bank Scheme (LBS)

Reserve Bank of India (RBI) has issued guidelines on the Lead Bank Scheme (LBS). Who is a Lead Bank? RBI designates a commercial bank as Lead Bank in each district, to coordinate the efforts of the banks, Government, National Bank for Agriculture and Rural Development (NABARD) and other stakeholders at the district level to improve credit flow to the priority sectors and promote financial inclusion in the district. 12 public sector banks and 2 private sector banks (Jammu & Kashmir Bank and ICICI Bank) have been assigned lead bank responsibilities, covering 778 districts across the country. What appointments are made under the LBS? Every lead bank shall appoint a Lead District Manager (LDM) in each district where it has the lead bank responsibility, to exclusively oversee and coordinate the implementation of the LBS in the district. NABARD shall appoint a District Development Manager (DDM) for each district to act as a liaison between NABARD and the district-level banking and financ...
Post a Comment
Read more