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Sovereign Gold Bonds (SGB’s)

About

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

Comparison

ParticularsPhysical Gold/JewelleryGold ETFSovereign Gold Bond
Returns profileLower than gold due to making charges, certification and other such chargesSame as real gold but reduced by the expense ratio and/or any tracking chargesHigher than actual gold return
SafetyHigh theft risk and loss of ornament valueHighVery High as issued by Indian government
TaxationLong term and short term capital gains applicableLong term and short term capital gains applicableLong term and short term capital gains applicable. No capital gains if redeemed at maturity.
As margin collateralNot accepted AcceptedAccepted with least haircut
TradabilityHigh transaction costTradable on stock exchange and liquidity is provided by the AMCCan be traded and redeemed from the 5th year with the government
Storage costHighMinimalMinimal
Interest NoneNone2.5% p.a. based on issuance price

Risk of investing in sovereign gold bonds

If the market price of gold decreases then the value that could be realised would be lower. However, units of gold will stay constant.

Modes of holding these bonds

The bonds can be held in physical or demat mode. However, we suggest to hold in demat form so that it may be sold on the exchange in case of fund requriement prior to matrutiy. Moreover, if the bonds are held in demat form they can be pledged and used for margin purpose for trading and can be pledged to a NBFC/Bank to borrowed funds at lower rates if requried.

Price of gold bond issuance

The nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.

Eligible investors

Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.

Issuance calendar for FY 2021-2022

Sr. No.TrancheDate of SubscriptionDate of Issuance
1.2021-22 Series IMay 17–21, 2021May 25, 2021
2.2021-22 Series IIMay 24–28, 2021June 01, 2021
3.2021-22 Series IIIMay 31-June 04, 2021June 08, 2021
4.2021-22 Series IVJuly 12-16, 2021July 20, 2021
5.2021-22 Series VAugust 09-13, 2021August 17, 2021
6.2021-22 Series VIAugust 30-September 03, 2021September 07, 2021

How to invest?

You may contact your RM or alternatively you can send a request via text or phone call to 7330811155 or (040)66918825. The procedure to invest would be to fund your existing trading account to the amount of units that you would like to apply for and let your RM know the number of units you would like to apply and he/she will place the respective bid on the NSE exchange in your own trading code.

Tenure of the gold bond and liquidity?

The gold bond is issue for 8 years with the option to redeem from the 5th year of the date on issue on the coupon payment dates. Alternatively, the bond is listed and can be traded on the exchanges subject to availability of liquidity for the same. (i.e. buying interest)

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