Sovereign Gold Bond Scheme has been in the news recently. RBI has thus launched an SGB calendar for 2021-22. Moreover, investors can invest in these bonds to lower their risks and also to meet the future need for gold. In this article, we discuss the SGB Scheme and its latest updates in detail. Let's begin!
What are Gold Bonds?
They are a type of Government securities. Moreover, denoted in grams of gold. Also, they are an alternative to physical gold. The investor pays the issue price in cash. Redemption of bonds upon maturity is in cash as well.
The Reserve Bank of India issues these SGB on behalf of the Government of India.
The investor gets the market value of gold on redemption as well as interest. Thus, his investment is safe.
It thus offers a better option in place of holding physical gold. Also, the risks of keeping gold are no longer there with this.
Doubts regarding the purity of gold are not there with this option in comparison to physical jewelry. RBI or Demat keeps the record of the bond, thus no loss of scrip is there.
Who can invest in this scheme?
All persons resident in India, as stated in the Foreign Exchange Management Act, 1999 are thus eligible to invest in this Scheme.
HUF's, Charitable institutions, trusts, etc. can hold these bonds as well. Also, individuals who have changed their status from resident to non-resident can too keep these bonds.
Thus, investors looking to diversify in equity, debt, and gold can go for this option.
Sovereign Gold Bonds Scheme 2021-2022 Calendar
Recently, the Government of India in consultation with the Reserve Bank of India has thus launched the Sovereign Gold Bond Scheme calendar for 2021-22. Investors can thus invest in these tranches as per their choice. Moreover, the calendar has the following dates,
|Series/Tranche||Date of Subscription||Date of Issuing|
|2021 – 22 (Series 1)||May 17 – 21, 2021||May 25, 2021|
|2021 – 22 (Series 2)||May 24 – 28, 2021||June 1, 2021|
|2021 – 22 (Series 3)||May 31– June 4, 2021||June 8, 2021|
|2021 – 22 (Series 4)||July 12– 16, 2021||July 20, 2021|
|2021– 22 (Series 5)||August 9 – 13, 2021||August 17, 2021|
|2021– 22 (Series 6)||August 30 – September 3, 2021||September 7, 2021|
Also, Tranche 1 or Series 1 opened for subscription on May 17th,2021, and closed on May 21st,2021(Priced at ₹4,777 per unit).
In June 2021, two series of tranches issued at ₹4,839. Furthermore, September 2021 will see all tranches completed. The government of India issues these bonds through the RBI and hence is the safest investment option in India.
Also, these bonds offer 2.5% interest per annum, payable half-yearly. Consequently, the online investors of these bonds would get Rs 50 per gram as a discount.
Moreover, the duration of these bonds is 8 years.
However, investors can prematurely withdraw after 5 years, subject to conditions. Also, the minimum investment is of 1 gram gold value and in multiples of 1 gram above it.
Scheduled commercial banks, post offices, Stock Holding Corporation of India, and stock exchanges sell these bonds.
Benefits of the Gold Bond Scheme
The following points help these bonds score over other options in the category,
1. Firstly, you pay a far lesser amount in comparison to buying physical gold.
2. Secondly, you get an assured rate of interest.
3. Thirdly, no such costs of holding or storage.
4. Fourthly, there are no capital gains on maturity and redemption. If transferred to non-individual investors, indexation benefits apply. Taxation of interest. Though, no TDS cut on maturity or redemption.
5. Lastly, it has the sovereign guarantee of the government.
Disadvantages of the Gold Bond Scheme
Though there are numerous benefits to it, these bonds also have some issues,
1. Long Maturity: 8 year maturity period often discourages investors.
However, the government's logic behind fixing such a long maturity is to avoid the price volatility of gold, which may result in losses to investors.
2. Low Liquidity: Minimum redemption period is 5 years, maximum being 8 years. This can be a problem for investors seeking short-term withdrawal.
When to buy these bonds?
1. Investing for a long term for daughters' marriage: If you plan to invest for a long period of time, perhaps your daughters' marriage, then you can go for this option.
You can buy and hold, and reinvest in a fresh issue on maturity. When you reach the goal, redeem the bond and buy jewelry from it.
2. Portfolio diversification: Besides Gold mutual funds and Gold ETF, these bonds too can help you in reducing the portfolio risk.
The Gold bond is one of the safest investment options available to investors in India.
This has several advantages over buying physical gold that is subject to purity and theft concerns.
Offers a great chance to diversify your portfolio. Investors who thus wish to gift jewelry to their spouse or daughter in the future can avail of this option.
Gold has corrected and bounced back to great levels again in recent times.
But there is a chance of gold prices to up in the medium to long term, so can be a difficult option for short-term investors.
All in all, it is a great investment option that has the assurance of the government. Happy investing!