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RBI gold bonds investments

  • Published
    19th Dec, 2022
Context

The Reserve Bank of India (RBI) has announced the Sovereign Gold Bond Scheme 2022-23 –‘Series III’, which will be open for subscription during December 19-23, 2022.

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 for holding physical gold.
  • Cash redemption: 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 the Reserve Bank on behalf of the Government of India.
  • Advantage: It offers a superior alternative to holding gold in physical form.
  • The risks and costs of storage are eliminated.
  • Investors are assured of the 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 2022-23:

  • Value of Gold: The nominal value of the bond based on the simple average closing price; published by the India Bullion and Jewellers Association Ltd (IBJA), for gold of 999 purity of the last three working days of the week preceding the subscription period works out to 5,409 per gram of gold.
  • Redemption for Online inventors: There is a discount of 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode.
  • Gain for investors: The return for investors is 15.39 per cent in a year’s time, including the 2.50 per cent interest rate offered by the RBI.
    • The total gain is 45 per cent including the 2.50 per cent interest rate to be availed by investors.
  • Higher Interest on Gold bonds deposits: While banks are offering 70-7 per cent interest on one-year deposits, gold bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment.
    • Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.
  • After maturity benefits: On maturity, gold bonds will be redeemed in Indian rupees and the redemption price will be based on a simple average closing price of gold of 999 purity of the previous three business days from the date of repayment.

 

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