The Reserve Bank of India (RBI), on behalf of the union government, has announced the Sovereign Gold Bond Scheme (SGB), which is a government bond, comes in the form of a certificate to the investors. Now, RBI has disclosed the five days issue date of 'Sovereign Gold Bond Scheme (SGB) 2021-22 - Series VI', that is, from August 30 to September 3, 2021. The price of this tranche has been fixed at Rs. 4732 per gram of gold. The government, like always, is providing a discount of Rs. 50 per gram less than the nominal value to the investors, who will apply online and pay digitally. "For such investors, the issue price of Gold Bond will be Rs. 4,682 per gram of gold," the RBI stated. Earlier, the union government said that the RBI will announce the issuance of the SGB scheme in six tranches from May 2021 to September 2021.
The SGB scheme is sold via banks (except small finance banks and payment banks), Stock Holding Corporation of India Ltd. (SHCIL), designated post offices, and recognised stock exchanges like NSE and BSE. SGB is a scheme that allows the central government to defuse liquidity from the economy while giving an opportunity to the citizens to invest in gold. The scheme was launched in November 2015.
Why should one invest in Sovereign Gold Bond Scheme?
The Sovereign Gold Bond (SGB) Scheme is an absolutely safe and secured 24 carat gold investment without the pressure of storage cost. RBI will store the gold on behalf of the government for the investor. SGB was introduced with an objective to "reduce the demand for physical gold and shift a part of the domestic savings used for the purchase of the yellow metal into financial savings." In addition to that, in SGB, the investor is not required to bear the GST cost. The SGB issue rate is fixed on the basis of a simple average closing price of gold of 999 purity, published by the India Bullion and Jewellers Association (IBJA) Ltd., in the last three working days of the week, preceding the subscription period.
Unlike any other gold investment, SGB also offers interest at the rate of 2.5%, which is payable half-yearly. The final interest will be paid along with the principal amount at maturity. The bonds are designated in multiples of gram(s) of gold with a basic unit of 1 gram. So, the minimum investment should be 1 gram of gold, while the maximum limit of the investment can be 4 kgs for individuals, 4 kgs for HUFs, and 20 kgs for trusts and similar entities.
The tenure of an SGB is 8 years with an exit option after the 5th year to be exercised, on the next interest payment dates. But, in any need of immediate liquidity, one can also sell the bond in the secondary market, that is the equity market. With internet banking, investing in SGB became easier now. Long-term investors are mostly interested in this kind of gold investment that offers diversity in the investment portfolio. Investment in gold also means keeping a hedge against inflation.