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Sovereign Gold Bond: All Details

The nominal value of gold bonds in Indian rupees is fixed on a simple average of the closing gold price of 99.9% purity published by the All India Bullion and Jewelers Association Limited in the last 3 days of the preceding week of the subscription period. Subscribers who invest in the gold bond program will receive payment in digital mode at a discount of 50 rupees per unit, as applicable according to the RBI. If the issue price of the bonds is 50 grams below face value, the investor must submit a payment request in digital mode.

Investors will be paid the issue price in cash and the bond will be repaid in cash when it matures. Investors will be issued a certificate, which will be held until the date of issue of the bond. At maturity, the repayment proceeds correspond to the prevailing market value of the invested gram of gold (INR).

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Under the gold monetization program, Government bonds will be offered by the Reserve Bank of India in tranches in consultation with the Indian Government. Investors are certain of the market value of gold at maturity and periodic interest rates. The amount of gold investors pay protects them from receiving the current market price at the time of repayment or early repayment.

A government bond is a government bond denominated in grams of gold. It is a safer investment tool with less susceptibility to market risk and volatility. Investors will pay the issue price in cash and the bond will be repaid in cash when it matures.

The minimum amount allowed in a bond is 1 gram of gold. The maximum subscription limit is 4 kg for individual HUFs and 20 kg for trusts and similar units per financial year, as the RBI reports from time to time. 

The bond is denominated in several grams of gold, with a base unit of 1 gram. The bond has a maturity of 8 years, but investors can opt out after 5 years. It is limited to sales to residents, individuals, HUFs, trusts, universities and nonprofits.

Fifth, the advantage of the government’s gold bond program is that there is no capital gains tax on maturity and repayment for individual investors. Investors with low risk appetite, who want a significant return on their investment, can opt for this program.

It should be noted that the above provisions are only applicable in the case of deceased or underage investors. The index benefits are the same for non-individual investors regardless of the maturity shift.

The government has issued the fourth tranche of government bonds at a lower price after the success of the first three tranches. Investors wishing to subscribe to the bonds must offer at least 1 Gram of gold at Rs 480.7 (compared to Rs 489.9 for the previous tranche). Investors can apply for this tranche only if the government offers a 50 rupees per gram discount, which expires on July 16. Government bonds are a popular instrument for investors who want to invest in gold but do not want to physically hold it.

By the end of March 2021, the SGB system had raised a total of 25,702 rupees since its introduction. The Government has announced that it will issue six tranches of the government bonds (SGB) from May 2021 to September 2021, and that Reserve Bank of India (RBI) will issue the bonds on behalf of the government. The bonds are sold to banks, small financial institutions, payment banks, equity investment companies of India Limited (SHILC), designated post offices and recognised exchanges, namely National Stock Exchange of India Limited (BSE).

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