Sovereign gold bond (SGB)-FAQ

What is a sovereign gold bond (SGB)?

A sovereign gold bond is a substitute for holding physical gold. The bonds are issued by the Reserve Bank of India (RBI) on behalf of the government and are bonds denominated in gold. The government issues such bonds in tranches at a fixed price that investors can buy through banks, post offices and also in the secondary markets through the stock exchange platform.

What are the benefits of buying SGB?

These bonds are backed by a sovereign guarantee and can also be held in Demat form. Further, they are priced as per the underlying spot gold prices. Hence, investors who want to invest in gold can buy the bonds without worrying about the safe keeping of physical gold along with locker charges, making charges or purity issues. Plus, these bonds offer interest at the rate of 2.5% per annum on the principal investment amount. While the interest on the bonds is taxable, the capital gains at the time of redemption are exempt from tax. These bonds can also be used as collateral for availing loans from banks and NBFCs.

How are the bonds structured?

SGB has a fixed tenure of eight years, though early redemption is allowed after the fifth year from issuance. Since the bonds are listed on the exchange, these can be transferred to other investors as well. The bonds are priced in rupees based on the simple average closing price of gold of 999 purity, published by the India Bullion and Jewellers Association for the last three business days of the week preceding the subscription period. At the time of redemption, cash equivalent to the number of units multiplied by the then prevailing price would be credited to the bank account of the investor.

How was the latest tranche priced?

The latest tranche, which closed for subscription last week, was priced at? 4,590 per gram. Those who apply online were eligible for a discount of? 50 per gram. Reports suggest that RBI will again issue such bonds in June, July, August and September.

Are there any risks in investing in SGB?

A capital loss is a risk since the bond prices would reflect any change in gold prices. If gold prices fall, the principal investment would fall proportionately.

Source: TH

Join Our Telegram

The new Indian road to Lipu Lekh-Nepal’s protests

Model Contract Farming Act, 2018

Oceanic Anoxic Event 1a and MASS EXTINCTION

25 Dec, 24
SHARE

Oceanic Anoxic Event 1a from the Paris Basin (Environment) Paper-3 PMP OAE 1a refers to a period during the Cretaceous Period (145 million years ago and ended 66 million years ago) when Earth's oceans became depleted of oxygen, causing a significant disruption in marine life. Cause: The event is believed to have been

Viksit Panchayat Karmayogi (Good governance)

26 Dec, 24
SHARE

Viksit Panchayat Karmayogi (Good governance) Governance GS PAPER-2 PMP Dr. Jitendra Singh launched the ‘Viksit Panchayat Karmayogi’ initiative on Good Governance Day, celebrated to mark the 100th birth anniversary of former Prime Minister Atal Bihari Vajpayee. The initiative, which is part of the broader ‘Prashasan Gaon

Major programmes to control Air Pollution

23 Dec, 24
SHARE

Major programmes to control Air Pollution National Clean Air Programme? It was launched by the Ministry of Environment, Forests and Climate Change (MoEFCC) in January 2019. It is the first-ever effort in the country to frame a national framework for air quality management with a time-bound reduction target. The

Air pollution and Air quality Measures in India

21 Dec, 24
SHARE

Air pollution and Air quality Measures in India (Environment) GS Paper-3 P-M-P Air pollution may be defined as the presence of any solid, liquid or gaseous substance including noise and radioactive radiation in the atmosphere in such concentration that may be directly and/or indirectly injurious to humans or other l

Geopolitical Significance of Ports

20 Dec, 24
SHARE

Geopolitical Significance of Ports (IR) Act as geopolitical assets: Ports enhance the projection of strategic reach, which helps strengthen the country’s control over important sea and energy supply routes. E.g. Indian Navy’s staging base at Agalega Islands will enable marine patrols