Sovereign gold bonds: public subscription begins today

Sovereign gold bonds (SGBs) issued by the Reserve Bank of India (RBI) opened its public subscription on Monday (August 22).

“Sovereign Gold Bonds 2022-23 (Series II) will be opened for subscription during the period August 22-26, 2022 with a settlement date of August 30, 2022,” the finance ministry said in a statement.

The issue price for the next tranche of Sovereign Gold Bond Scheme 2021-22, which will remain open for subscription for five days from Monday, has been fixed at ₹5,197 per gram of gold, the RBI said on Friday.

“The nominal value of the bond…works out to ₹5,197,” the central bank said in a statement.

This is the second series of the Sovereign Gold Bond scheme for the financial year 2022-23. The first tranche took place in June.

The central government, in consultation with the RBI, has decided to offer 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.

“For such investors, the issue price of Gold Bond will be ₹5,147 per gram of gold,” the RBI said.

The latest SGB offering price is ₹106 more than the previous series announced in June this year. The price of the previous sovereign gold bond was ₹5,091 per gram.

The RBI issues the bonds on behalf of the Centre. The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges — NSE and BSE.

The scheme is valid for eight years and carries an option of premature redemption after the fifth year. This option can be availed on the date when interest is payable.

Investors can make payment for the SGBs through cash payment (up to a maximum of ₹20,000) or demand draft or cheque or electronic banking. Online payment will get them a ₹50 discount per gram of gold.

Also Read: Latest tranche of RBI’s Sovereign Gold Bonds is on sale; is it a good buy?

The minimum permissible investment will be 1 gram of gold. The maximum limit of subscriptions is 4 kg for individuals.

Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to the ordinary gold loan mandated by the RBI from time to time.

The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.

Sovereign Gold Bond Scheme was launched by the government in November 2015, under Gold Monetisation Scheme. Under the scheme, the issues are made open for subscription in tranches by RBI in consultation with the government. RBI notifies the terms and conditions for the scheme from time to time.

The scheme was launched with an objective to reduce the demand for physical gold and shift a part of the domestic savings — used for the purchase of gold — into financial savings.

The price of the bond is fixed in Indian currency on the basis of a simple average 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.

The know-your-customer (KYC) norms will be the same as that for the purchase of physical gold.