Madhavi Gaur
October 03, 2023 01:56
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Explore the intricacies of the Sovereign Gold Bond Scheme, launched by the Indian government. Check out details about issuance, eligibility, features, and unique benefits and more in this article.
Sovereign Gold Bond Scheme: The Government of India, in collaboration with the Reserve Bank of India, has recently decided to release Sovereign Gold Bonds (SGBs) in tranches for the fiscal year 2023-24. The initial SGB scheme was introduced by the government in November 2015 under the Gold Monetisation Scheme, with the aim of reducing the demand for physical gold and diverting a portion of domestic savings, traditionally used for gold purchases, into financial savings.
Sovereign Gold Bond Scheme: The Government of India, in collaboration with the Reserve Bank of India, will release Sovereign Gold Bonds (SGBs) in tranches for the fiscal year 2022-23.
Investment in SGBs surged significantly during the Covid-impacted years as investors sought safer options amid volatility in equity markets. The years 2020-21 and 2021-22 accounted for nearly 75% of total sales of the bonds since the scheme’s inception in November 2015.
| Item | Details |
|---|---|
| Issuance | Issued by the Reserve Bank of India on behalf of the Government of India. |
| Eligibility | SGBs will be restricted for sale to resident individuals, HUFs (Hindu Undivided Family), Trusts, Universities, and Charitable Institutions. |
| Tenor | The tenor of the SGB will be eight years with an option of premature redemption after the 5th year. |
| Minimum size | Minimum permissible investment will be One gram of gold. |
| Maximum limit | The maximum limit of subscription: 4 Kg for individuals, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal year (April-March). |
| Joint holder | In joint holding, the investment limit of 4 Kg will be applied to the first applicant only. |
| Issue price | The price of SGB will be fixed in Indian Rupees based on the simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited. |
| Sales channel | SGBs will be sold through Scheduled Commercial banks (excluding Small Finance Banks, Payment Banks, and Regional Rural Banks), Stock Holding Corporation of India Limited, Clearing Corporation of India Limited, designated post offices, National Stock Exchange of India Limited, and Bombay Stock Exchange Limited, either directly or through agents. |
| Interest rate | Investors will be compensated at a fixed rate of 2.50% per annum, payable semi-annually on the nominal value. |
| Collateral | SGBs can be used as collateral for loans. |
| Tax treatment | The interest on SGBs shall be taxable as per the provisions of the Income Tax Act, 1961. Capital gains tax arising on redemption of SGB to an individual is exempted. |
| Tradability | SGBs shall be eligible for trading. |
| SLR eligibility | SGBs obtained by banks through the pledge process will be considered as part of their Statutory Liquidity Ratio requirements. |
Launch: The SGB scheme was initiated in November 2015 to reduce the demand for physical gold and channel a portion of domestic savings, traditionally used for gold purchases, into financial savings.
Issuance: Gold Bonds are issued as Government of India Stock under the Government Securities (GS) Act, 2006. The Reserve Bank of India (RBI) issues these bonds on behalf of the Government of India. They are sold through Commercial banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognized stock exchanges such as the National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.
Eligibility: The bonds are restricted for sale to resident individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions.
What is India Bullion and Jewellers Association Ltd. (IBJA)?
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