Sovereign Gold Bond Scheme has started; go online for Rs 50 discount this Dhanteras

First Published 9, Nov 2020, 9:16 AM

The eighth series of Sovereign Gold Bond Scheme 2020-21 will open for subscription today. The government and the Reserve Bank of India are offering a discount of Rs 50 per gram to those applying and paying for the scheme online.

<p>In a statement, the finance ministry said: "The Sovereign Gold Bond Scheme 2020-21-Series VIII will be opened for subscription for the period from November 9-13. The nominal value of the bond based on the simple average closing price for gold of 999 purity of the last three business days of the week preceding the subscription period, i.e. November 4-6, 2020 works out to Rs 5,177 per gram of gold. The government of India, in consultation with the Reserve Bank of India, 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 Gold Bond will be Rs 5,127 per gram of gold." <strong>Confused about what Sovereign Gold Bond Scheme is? Read on.</strong></p>

In a statement, the finance ministry said: "The Sovereign Gold Bond Scheme 2020-21-Series VIII will be opened for subscription for the period from November 9-13. The nominal value of the bond based on the simple average closing price for gold of 999 purity of the last three business days of the week preceding the subscription period, i.e. November 4-6, 2020 works out to Rs 5,177 per gram of gold. The government of India, in consultation with the Reserve Bank of India, 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 Gold Bond will be Rs 5,127 per gram of gold." Confused about what Sovereign Gold Bond Scheme is? Read on.

<p><strong>What is Sovereign Gold Bond (SGB)? Who is the issuer?</strong><br />
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.<br />
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<p><strong>Why should I buy SGB rather than physical gold? What are the benefits?</strong><br />
The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.</p>

What is Sovereign Gold Bond (SGB)? Who is the issuer?
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.
 

Why should I buy SGB rather than physical gold? What are the benefits?
The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.

<p><strong>Are there any risks in investing in SGBs?</strong><br />
There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.</p>

<p><strong>Who is eligible to invest in the SGBs?</strong><br />
Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.<br />
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Are there any risks in investing in SGBs?
There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.

Who is eligible to invest in the SGBs?
Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.
 

 

<p><strong>Whether joint holding will be allowed?</strong><br />
Yes, joint holding is allowed.</p>

<p><strong>Can a Minor invest in SGB?</strong><br />
Yes. The application on behalf of the minor has to be made by his/her guardian.</p>

<p><strong>Can an investor hold more than one investor ID for subscribing to the Sovereign Gold Bond?</strong><br />
No. An investor can have only one unique investor Id linked to any of the prescribed identification documents. The unique investor ID is to be used for all the subsequent investments in the scheme. For holding securities in dematerialized form, quoting of PAN in the application form is mandatory.</p>

Whether joint holding will be allowed?
Yes, joint holding is allowed.

Can a Minor invest in SGB?
Yes. The application on behalf of the minor has to be made by his/her guardian.

Can an investor hold more than one investor ID for subscribing to the Sovereign Gold Bond?
No. An investor can have only one unique investor Id linked to any of the prescribed identification documents. The unique investor ID is to be used for all the subsequent investments in the scheme. For holding securities in dematerialized form, quoting of PAN in the application form is mandatory.

<p><strong>What is the minimum and maximum limit for investment?</strong><br />
The Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March). In case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions</p>

What is the minimum and maximum limit for investment?
The Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March). In case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions

<p><strong>Can each member of my family buy 4Kg in their own name?</strong><br />
Yes, each family member can buy the bonds in his/her own name if they satisfy the eligibility criteria as defined at Q No.4.</p>

<p><strong>Can an investor/trust buy 4 Kg/20 Kg worth of SGB every year?</strong><br />
Yes. An investor/trust can buy 4 Kg/20 Kg worth of gold every year as the ceiling has been fixed on a fiscal year (April-March) basis.</p>

<p><strong>What is the rate of interest and how will the interest be paid?</strong><br />
The Bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.</p>

Can each member of my family buy 4Kg in their own name?
Yes, each family member can buy the bonds in his/her own name if they satisfy the eligibility criteria as defined at Q No.4.

Can an investor/trust buy 4 Kg/20 Kg worth of SGB every year?
Yes. An investor/trust can buy 4 Kg/20 Kg worth of gold every year as the ceiling has been fixed on a fiscal year (April-March) basis.

What is the rate of interest and how will the interest be paid?
The Bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.

<p><strong>What will I get on redemption?</strong><br />
On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.</p>

<p><strong>Can I encash the bond anytime I want? Is premature redemption allowed?</strong><br />
Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.</p>

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What will I get on redemption?
On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.

Can I encash the bond anytime I want? Is premature redemption allowed?
Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.

 

<p><strong>Can I use these securities as collateral for loans?</strong><br />
Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loan prescribed by RBI from time to time. Granting loan against SGBs would be subject to decision of the bank/financing agency, and cannot be inferred as a matter of right.&nbsp;</p>

Can I use these securities as collateral for loans?
Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loan prescribed by RBI from time to time. Granting loan against SGBs would be subject to decision of the bank/financing agency, and cannot be inferred as a matter of right.