For those looking to invest in gold, the RBI's Sovereign Gold Bond (SGB) Scheme 2020-21 – Series IX will open for subscription on Monday, December 28. The scheme will remain open till January 1, 2021.
Sovereign Gold Bonds (SGBs) are government-backed securities issued by the Reserve Bank of India (RBI). The bonds are denominated in grams of gold with 999 purity.
SGBs are considered a safe method to park money.
The issue price for the latest tranche of gold bonds has been fixed at Rs 5,000. The Union government in consultation with the RBI, has decided to offer a discount of Rs 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 such investors, the issue price of SGB will be Rs 4,950 per gram of gold, according to RBI.
The tenure of the bond will be for a period of eight years with exit option after fifth year to be exercised on the interest payment dates.
The value of the bond is based on the simple average closing price (published by the India Bullion and Jewellers Association Ltd) for gold of 999 purity of the last three business days of the week preceding the subscription period, that is, December 22-24.
The bonds are restricted for sale to resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions. The minimum permissible investment will be 1 gram of gold and the maximum limit of subscription shall be 4 kg for individuals and HUFs, and 20 kg for trusts and similar entities per fiscal (April-March).
The gold bonds will be sold through banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India (SHCIL), designated post offices, and recognised stock exchanges (NSE and BSE). The sovereign gold bond scheme was launched in November 2015 with an objective to reduce the demand for physical gold and shift a part of domestic savings — used for purchase of gold — into financial savings.
As per RBI's Annual Report 2019-20, a total of Rs 9,652.78 crore (30.98 tonnes) has been raised through the sovereign gold bond scheme (37 tranches) since its inception in November 2015.
The RBI issued 10 tranches of sovereign gold bonds for an aggregate amount of Rs 2,316.37 crore (6.13 tonnes) during 2019-20.