Sovereign gold bond (SGB) scheme, a government-run scheme, allows gold investments in non-physical form. The Sovereign Gold Bond (SGB) scheme comprises government securities denominated in gold wherein investors are required to pay the issue price in cash. The bonds are redeemed in cash on maturity. SGB was launched in November 2015 with an objective to reduce the demand for physical gold and shift a part of the domestic savings, used for purchase of gold, into financial savings, according to Reserve Bank of India website – rbi.org.in.
Here are 10 things to know about Sovereign Gold Bond (SGB) scheme:
- SGB is issued by Reserve Bank India on behalf of Government of India and is sold through scheduled commercial banks (except small finance banks and payment banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges NSE and BSE, according to the Reserve Bank of India. (Also read: Here Are 5 Types Of Gold Investments You May Choose From)
- The Sovereign Gold Bond is restricted for sale to resident individuals, HUFs (Hindu Undivided Families), trusts, universities and charitable institutions.
- The tenor of the bond is for a period of eight years with exit option after fifth year to be exercised on the interest payment dates.
- The minimum permissible amount allowed for investment in SGB is one gram of gold.
- The maximum limit of the subscription is four kilograms for individuals and HUFs, and 20 kilograms for trusts and similar entities per fiscal year (April-March), which is notified by the government from time to time.
- The price of bond is fixed in rupees on the basis of a simple average of closing price of gold of 99.9 per cent purity, published by the India Bullion and Jewellers Association Limited for the last three working days of the week preceding the subscription period.
- These bonds are tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
- On May 30 this year, the central bank announced the schedule for issuance of SGBs for the first half of the current financial year.
- The first, second and third tranches of the SGB scheme 2019-20 opened for subscription for five days each in June, July and August this year.
- The fourth tranche will open for five days starting September 9.