Everything You Need To Know About Sovereign Gold Bonds

By: Bank of Baroda
Wed Jul 3, 2019
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That Indians love investing in gold, is no hidden secret. We buy gold on big and small occasions. Gold is considered an excellent investment in India, irrespective of the form in which it is purchased. However, when you buy gold jewellery, you end up paying a lot more in making charges. How, then, can you benefit from gold in the long term? Well, you can invest in sovereign gold bonds. Let’s find out what is a sovereign gold bond and other essential facts about it.

What is sovereign gold bond?

Introduced in 2015 by the Government of India, sovereign gold bonds were launched under the Gold Monetisation Scheme. The Government issues gold bonds every year (since 2015). Gold is issued in tranches by the RBI, in consultation with the Government.

Under the scheme, bonds are denominated in multiples of grams with the minimum unit being 1 gram gold. The Government offers interest of 2.50% per annum on gold bonds, which is paid semi-annually.

Essential facts about the sovereign gold bond scheme

Having explained what is sovereign gold bond scheme, here’s a look at some crucial facts about this scheme.

  • Sovereign gold bonds are provided for tenures of up to 8 years. However, one may exit the bond only after the 5th year. You may exit the scheme only on the interest payment dates on the 5th, 6th and 7th year.
  • You may subscribe for a maximum limit of up to 4 kilograms gold if you are an individual subscriber or a member of a Hindu Undivided Family in a fiscal year (Apr-Mar). Trusts and charitable entities can subscribe for up to 20 kilograms of gold.
  • Under the Government Securities Act of 2006, Gold bonds are issued as stocks and investors are provided with a holding certificate for the shares issued.

Basic Features and benefits of sovereign gold bond schemes

Now that we know what is gold bond scheme let’s look at the basic features and advantages of the scheme.

  • You can hold your gold bonds in paper form or demat form, whichever you find convenient.
  • You can buy gold bonds in multiple weight denominations with 1 gram being the minimum weight.
  • Investing in the gold bond is rather flexible as you have the option to choose the amount you wish to invest
  • You can earn interest on your gold bonds semi-annually
  • You do not have to worry about storing the gold since it is issued in certificates or demat form and not in the physical form.
  • The sovereign gold bond scheme is backed by the Government, making it one of the safest schemes, in that the investor does not have to worry about the purity of the gold.
  • While the scheme matures after eight years, you can prematurely withdraw from it after five years

Final word: Knowing what is gold sovereign bond is essential before investing. Speak to your investment advisor before you invest in the scheme.

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