Sovereign Gold Bond (SGB) is a government security denominated in grams of gold, which is a substitute for holding physical gold. The scheme was launched by the Government of India in November 2015 under the Gold Monetisation Scheme. The bonds are issued by the Reserve Bank of India (RBI) on behalf of the central government. The nominal value of the bond is fixed on the basis of the simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last three business days of the week preceding the subscription period. The bonds are issued in tranches for limited periods. The bonds are held in the books of the RBI or in Demat form, eliminating the risk of loss of script, etc. .
Some key features of the Sovereign Gold Bond Scheme include:
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Interest rate: The bonds pay interest at the rate of 2.5% per year, which is payable on a half-yearly basis.
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Redemption: The bonds are redeemed in cash on maturity. The investor will be advised one month before maturity regarding the ensuing maturity of the bond.
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Investment limit: The minimum investment in sovereign gold bonds is one gram with a maximum limit of subscription of 500 grams per person per financial year (April-March) .
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Payment options: Payment options for investing in the Sovereign Gold Bonds include cash payment, cheque, demand draft, electronic banking, and other payment modes.
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Customer services: The issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents through which these securities have been purchased will provide other customer services such as change of address, early redemption, nomination, grievance redressal, transfer applications, etc. .
The Sovereign Gold Bond Scheme provides an alternative for holding gold in a physical form and eliminates the risks and costs of storage. The scheme aims to reduce the demand for physical gold and shift a part of the domestic savings, used for the purchase of gold, into financial savings.
