Sovereign Gold Bond Scheme

Sovereign Gold Bond Scheme was launched by Govt in November 2015, under Gold Monetisation Scheme. Under the scheme, the issues are made open for subscription in tranches by RBI in consultation with GOI. RBI Notifies the terms and conditions for the scheme from time to time. The Salient Features of the scheme are given below:

 

S.No.
Item
Details

1.

Product name

Sovereign Gold Bond

2.

Issuance

To be issued by Reserve Bank India on behalf of the Government of India.

3.

Eligibility

The Bonds will be restricted for sale to resident Indian entities including individuals (in his capacity as individual, or on behalf of minor child, or jointly with any other individual), HUFs, Trusts, Universities and Charitable Institutions.

4.

Denomination

The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.

5.

Tenor

The tenor of the Bond will be for a period of 8 years with exit option in 5th, 6th and 7th year, to be exercised on the interest payment dates.

6.

Minimum size

Minimum permissible investment will be 1 gram of gold.

7.

Maximum limit

The maximum limit of subscribed shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal year (April-March) notified by the Government from time to time. A self-declaration to this effect will be obtained. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchase from the Secondary Market.

8.

Joint holder

In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.

9.

Issue price

RBI will issue Press Release stating issue price of the Bond before new Issue. Price of Bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited (IBJA) for the last 3 business days of the week preceding the subscription period.

10.

Payment option

Payment for the Bonds will be through cash payment (up to a maximum of Rs. 20,000/-) or demand draft or cheque or electronic banking.

11.

Issuance form

The Gold Bonds will be issued as Government of India Stocks under Government Security Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into Demat form.

12.

Redemption price

The redemption price will be in Indian Rupees based on simple average of closing price of gold of 999 purity of previous 3 working days published by IBJA.

13.

Sales channel

All the branches of the State Bank of India are authorised to accept the subscription

14.

Interest rate

The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.

15.

Collateral

Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time. The lien on the bond shall be marked in the depository by the authorised banks.

Note : The loan against SGBs would be subject to decision of the bank/financing agency and cannot be inferred as a matter of right.

16.

KYC

Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.

17.

Tax treatment

The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.

18.

Tradability

Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.