Context

The Government has decided to issue Sovereign Gold Bonds from May 2021 to September 2021 after the consultation with RBI.

About

What are Sovereign Gold Bonds?

• Government security: Sovereign Gold Bonds (SGBs) are government securities that are denominated in grams of gold.
• Substitute: They are substitutes of holding physical gold.
• Cash redeem: Investors have to pay the issue price in cash form and the bonds will be redeemed in the cash on maturity.
• Issue authority: The Bond is issued by Reserve Bank on behalf of the Government of India.
• Advantage: It offers a superior alternative to hold gold in physical form.
  • The risks and costs of storage are eliminated.
  • Investors are assured of market value of gold at the time of maturity and periodical interest.
• Sold through: The Bonds will be sold through Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL),designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

Features of the Sovereign Gold Bond Scheme 2021-22

• To be issued by Reserve Bank of India on behalf of the Government of India.
• The Bonds will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.
• The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
• The tenor of the Bond will be for a period of 8 years with exit option after5^th year to be exercised on the next interest payment dates.
• Minimum permissible investment will be 1 gram of gold.
• The maximum limit of subscription shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time.
• In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.
• Price of Bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited for the last 3 working days of the week preceding the subscription period.
• Payment for the Bonds will be through cash payment (upto a maximum of `20,000) or demand draft or cheque or electronic banking.
• The Gold Bonds will be issued as Government of India Stock under GS Act, 2006.
• The investors will be issued a Holding Certificate for the same.
• The Bonds are eligible for conversion into demat form.
• Bonds will be sold through Commercial banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices (as may be notified) and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.
• The investors will be compensated at a fixed rate of 2.50 percent per annum payable semi-annually on the nominal value.
• Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
• Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
• Bonds acquired by the banks through the process of invoking lien/hypothecation/pledge alone, shall be counted towards Statutory Liquidity Ratio.