SOVEREIGN GOLD BOND SERIES

SOVEREIGN GOLD BOND SERIES

Subject: Economy

Context: The latest installment of the government-run Sovereign Gold Bonds (SGBs) 2020-21- Series IX- is open for subscription. The last date for subscription is January 1, 2021, with  January 5 as the settlement date.

      Concept:

• This is the ninth tranche of gold bonds for this fiscal issued by the RBI. The first tranche of sovereign gold bond in the financial year 2020-2021 was open for subscription in April.
• The issue price for the next series of sovereign gold bonds is fixed at Rs 5,000 per gram, the Reserve Bank of India said in a statement.
• Sovereign Gold Bond 2020-21 is issued by the Reserve Bank India on behalf of the Government of India.

Sovereign Gold Bond Scheme

• SGB scheme was launched in November 2015 with an objective to reduce the demand for physical gold, by shifting the purchase of gold into financial savings. The yellow metal is considered to be a less risky asset during times of economic turmoil.
• Gold bonds offer an annual interest rate of 2.50% per annum on the issue price to investors, which is paid half-yearly.
• Gold sovereign bonds can be traded on stock exchanges within a specific date. They are substitutes for investment in physical gold. Gold bonds can be used as collateral for loans.
• Gold bonds come with a tenor of 8 years and a lock-in period of 5 years. The maximum limit of subscription shall be 4kg for individuals and HUFs, and 20kg for trusts and similar entities per fiscal year.
• The bonds are denominated in multiples of gram(s) of gold. The minimum investment limit in gold bonds is one gram of gold, where one unit of the bond is equal to one gram of gold.
• Investors can buy the SGB schemes through commercial banks, post offices, stock exchanges Bombay Stock Exchange and National Stock Exchange, and the Stock Holding Corporation.
• Investors who can invest in the SGBs include individuals, trusts, charitable organizations, Hindu Undivided Families (HUFs) and universities.