Check price, minimum and maximum limit, other details

By Anshul IST (Released)


SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Should you invest?

The second tranche (IInd) of the Sovereign Gold Bond (SGB) program for 2022-23 opened for subscription today 22 August. The bond issue will take place on August 30.

The issue price for the same has been set at Rs 5,197 per gram. Online subscribers can however obtain these bonds at a discount of Rs 50 per gram.

The issue price of the second tranche 2022-23 gold sovereign bond is based on the simple average value of the closing price published by the Indian Bullion and Jewelers Association (IBJA).

What is a sovereign gold bond (SGB)?

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors must pay the issue price in cash and the bonds are redeemed in cash at maturity.

Who is eligible to invest in SGBs?

A resident of India as defined by the Foreign Exchange Management Act 1999 is eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charities. Individual investors whose residential status subsequently changes from resident to non-resident may continue to hold SGBs until redemption/early maturity.

How to invest in SGB?

Those wishing to subscribe to SGBs in this tranche can apply through banks, Stock Holding Corporation of India Limited (SHCIL), NSE and BSE stock exchanges, designated post offices or through agents.

What are the minimum and maximum investment limits?

Bonds are issued in denominations of one gram of gold and multiples thereof. The minimum investment in the bond is one gram with a maximum subscription limit of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government of time to time per fiscal year (April – March).

When does an SGB mature?

The term of the bond is eight years, with an exit option after the fifth year to be exercised on the interest payment dates.

What is the interest rate and how is it paid?

The bonds bear interest at the rate of 2.50% (fixed rate) per annum on the amount of the initial investment. Interest is credited semi-annually to the investor’s bank account, and the final interest is payable at maturity together with the principal.

Is it the right time to invest in SGB? And what are the gold price trends?

Nish Bhatt, Founder and CEO of Millwood Kane International, said investing in gold through SGB is a decent option as it provides liquidity, requires no storage costs and is easier to redeem.

“Furthermore, it comes with an interest coupon payable semi-annually,” he said.

“SGB investment has received a robust response. RBI has already raised a total of over Rs 25,702 crore from November 2015 to FY21,” Bhatt said.

Regarding gold prices, he said that the yellow metal is currently trading near a 3-week low, and that the softness is largely due to the encouraging economic data set from the United States. .

“The strong dollar is also one of the reasons for the low gold prices. Gold prices have risen around 8% per year so far in terms of rupees. Going forward, Gold prices will be guided by the pace of rate hikes and the unwinding of liquidity measures by global central banks to contain inflation,” Bhatt said.

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