SOVEREIGN GOLD BOND SCHEME

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Context: The Reserve Bank of India (RBI) has announced that the issue price of the Sovereign Gold Bond (SGB) for the September 2023 series will be set at ₹5,923 per gram. The subscription window for this instalment of the SGB program will be open from September 11, 2023, to September 15, 2023.

Highlights of the Sovereign Gold Bond (SGB) Scheme

• The Sovereign Gold Bond scheme is a government-backed investment instrument designed to enable investors to invest in gold without the need for physical possession.
• Denomination: SGBs are denominated in grams of gold and are issued in multiples of one gram. The minimum investment allowed in SGBs is one gram and a maximum of 4 Kg in a financial year for individual investors. However, trust and recognized institutions are eligible to purchase a maximum of 20kg.
• Digital Subscription Discount: To promote digital transactions, the Government of India, in collaboration with the Reserve Bank, offers a discount of ₹50 per gram below the face value to investors who apply online and make payments through digital channels. These investors can purchase SGBs at an issue price of ₹5,873 per gram of gold.
• Tenure and Interest: SGBs come with an eight-year tenure and provide an annual interest rate of 2.5 percent. This interest is paid semiannually in the months of June and December.
• Redemption: Upon maturity, SGBs are redeemed at the prevailing market price of gold. The redemption value is determined based on the simple average of the closing price of gold with 999 purity over the previous three working days, as reported by the IBJA, and is denominated in Indian rupees.
• Purchase Channels: SGBs can be purchased through various channels, including banks, the Stock Holding Corporation of India Ltd (SHCIL), designated post offices, and recognized stock exchanges like the NSE and the BSE.
• Eligible Investors: The scheme is available for purchase by resident individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions.
• Redemption Details: SGBs mature after eight years but can be redeemed prematurely, starting from the fifth year, with a penalty for early redemption. The penalty decreases over the years, starting at one percent of the bond's nominal value in the first year of premature redemption.

In summary, the Sovereign Gold Bond scheme provides an attractive investment opportunity for individuals and entities looking to invest in gold with the backing of the Indian government. It offers the flexibility of digital subscriptions, interest income, and redemption based on prevailing gold prices, making it a popular choice for investors in India.

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