The Reserve Bank of India on Monday issued the fifth tranche of the Indian government’s Sovereign Gold Bonds (SGBs) for the financial year 2021-22.
Importantly, the government has set the issue price of the latest tranche at Rs 4,790 per gram of gold with an end date of August 13, 2021.
What are SGBs?
SGBs are regarded as substitutes for owning solid gold, which is issued by the Reserve Bank of India (RBI) on behalf of the government and its securities denominated in grams of gold.
Who can invest in it?
All residents of the country who are under the Foreign Exchange Management Act, 1999, are eligible to buy SGBs. Eligible investors also include Hindu Undivided Families (HUFs), trusts, universities and charitable institutions. Also, even if the investor’s residence state shifts from resident to a non-resident, they may continue to hold SGBs till early redemption or maturity.
Benefit and risks of buying SGBs
The same quantity of gold for which an investor has paid gets shielded. At the time of early redemption or maturity, they get the ongoing market price. They also get periodic interest payouts. Moreover, SGBs don’t carry charges or questions over the purity of the gold in jewellery form. The bonds are held in RBI lists or demat, removing the risk of loss of scrip.
On the flip side, the investor may have to face capital loss if the market price of gold slumps. However, they won’t lose in terms of units of gold they paid for.
For the initial investment, the government has fixed interests at the rate of 2.50 per cent per annum, credited semi-annually to the investor’s bank account. On maturity, the last interest is payable along with the principal.
Authorised agencies for selling SGBs
For selling SGBs, offices or branches of nationalised banks, scheduled private banks, scheduled foreign banks, assigned post offices and the SHCIL have been authorised by RBI.
Application forms can be availed from authorised entities and agents, or downloaded from the RBI website. Authorised banks may also give an online application facility.
