21st November, 2018

Sovereign Gold Bond Scheme

Overview

  • Sovereign Gold Bond (SGB) Scheme are government securities denominated in grams of gold (1 unit = 1 gram) issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are a replacement for physical bonds and are available in paper or DEMAT form.
  • SGB will be issued by RBI in tranches from time to time. The first series of sovereign gold bond for FY 2017-18 was issued on May 12th priced at Rs. 2901 per gram of gold, which is Rs. 50 less than the nominal value.
  • Investors who subscribe for SGB will earn returns linked to the price of gold. They will be compensated at a fixed rate of 2.5 % per annum payable semi-annually on the nominal value of investment.
  • The bonds will carry sovereign guarantee both on redemption amount and on interest. The interest earned through bonds will be liable to income tax and will be treated as interest income.
  • The tenure of the bond will be 8 years. However, investors can prematurely withdraw after 5 years. The redemption price will be based on the ongoing market price. This is fixed in Indian rupees based on the previous week’s average closing price for gold of 999 purity published by IBJA.
  • The scheme was launched with the objective of reducing the demand for physical gold by shifting a part of the estimated 300 tons of physical gold bars and coins being purchased every year for investment into DEMAT gold bonds.
  • Since most of the demand for gold in India is met through imports, the scheme will eventually help the country in maintaining its current account deficit within sustainable limits.
  • The sovereign bonds will be sold through banks, Stock Holding Corporation of India (SHCI), designated post offices, and recognized stock exchanges namely NSE & BSE, either directly or through agents.

Eligibility

  • Bonds will be sold only to resident Indian entities including individuals, HUFs, trusts, universities and charitable institutions.
  • As in the previous tranches of the scheme, bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
  • Investors can invest in a minimum of 1 gram of gold and a maximum of 500 grams per person per financial year (March-April). In case of joint holdings, the investment limit of 500 grams will be applied to the first applicant only.

Benefits

  • Investing in Sovereign Gold Bonds (SGB) is a superior alternative to holding gold in physical form as the risk and storage cost of handling physical gold is eliminated.
  • Unlike physical gold, purity of gold is assured in sovereign gold bonds as it is electronic form.
  • Investors receive underlying returns (redemption proceeds) from the bonds as well as an assured 2.5 % interest. The interest on the bond is paid half-yearly credited to the bank account provided in the application form.
  • Any capital gains arising on redemption of SGB to an individual is exempt from tax. No tax deducted from source (TDS) is applicable on interest.
  • The indexation benefit will be provided to long-term capital gains arising to any person on transfer of bonds or if bond is transferred before maturity.
  • Annual recurring wealth tax of 1 % is not applicable for SGB as in physical gold.
  • Bonds can be sold as collateral for loans and the loan-to-value (LTV) ratio will be as per gold loan norms mandated by RBI.
  • Bonds will be tradable on stock exchange/NDS-OM trading system from a date to be notified by RBI to allow early exits for investors who may so desire.
  • Investment in the bonds shall be eligible for Statutory Liquidity Ratio (SLR).
  • The issue price of bonds is discounted by Rs. 50 less than its nominal value.

Documents Required

To buy the gold bonds, beneficiaries will need the following documents:

  • Bank Account
  • Passport
  • PAN/TAN Card
  • Aadhaar Card
  • Voter`s Identity Card
  • Original Birth Certificate if application is on behalf of a minor

How to Apply

  • Sovereign Gold Bonds (SGBs) are available for subscription in tranches during particular dates notified by RBI from time to time. Application for investment in SGB can be done on behalf of a minor.
  • Nomination facility is available to a sole subscriber or all the joint holders of SGB. Nomination is not available in case the investment is on behalf of minor.
  • Individuals can subscribe for the bonds scheme at the receiving offices such as branches of scheduled commercial banks, SHCI office and designated post offices/agents.
  • Customers can get application forms from the receiving offices. The application form can also be downloaded from the RBI`s website: https://rbi.org.in/Scripts/BS_SwarnaBharat.aspx#mainsection. Some banks also provide online banking facility.
  • Customers need to fill the form stating clearly the grams of gold applied for, bank details and other particulars specified in the instructions of the form.
  • The receiving office will issue an acknowledgement receipt if all requirements of the application are fulfilled.
  • Investors will be issued a holding certificate for the gold bonds on the date of issuance of SGB.
  • Payments for the bonds will be accepted through cash (up to a maximum of Rs. 20,000) or demand draft or cheque or internet banking.

Relevant Link

You can find the detailed information at:

Contact Information 

In case of queries regarding SGB, you can email RBI at sgb@rbi.org.in.

Complaints regarding SGB scheme can be lodged in writing to the nearest RBI office as under:
The Regional Director,
Reserve Bank of India,
Consumer Education and Protection Department/
Banking Ombudsman,

(Location) : RBI branch location can be found here: https://www.rbi.org.in/Scripts/profilelink.aspx.

You can also lodge complaint to:
The Chief Manager,
Internal Debt Management Department,
Central Office,
FORT, Mumbai- 400001.

Contact details of RBI executives can be found here:
https://www.rbi.org.in/scripts/AboutusDisplay.aspx?pg=Departments.htm