The Reserve Bank of India (RBI) has set the issue price for the Sovereign Gold Bond (SGB) series starting in September 2023 at ₹5,923 per gram. The subscription period for this installment of the SGB program will run from September 11, 2023, to September 15, 2023. Investors who apply online and make digital payments will receive a discount of ₹50 per gram, allowing them to purchase SGBs at an issue price of ₹5,873 per gram.
The SGB scheme offers a government-backed investment option for those interested in gold without the need for physical possession. These bonds are issued in multiples of one gram and have a minimum investment requirement of one gram, with a maximum limit of 500 grams per individual per fiscal year (April to March). The bonds come with an eight-year tenure and provide an annual interest rate of 2.5%, paid bi-annually in June and December. Upon maturity, the bonds are redeemed at the prevailing market price of gold.
Investors can purchase SGBs through various channels, including banks, the Stock Holding Corporation of India Ltd (SHCIL), designated post offices, and recognized stock exchanges such as the NSE and BSE. The scheme is available for purchase by resident individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions.
Specific maximum investment limits apply based on the investor category. Individuals and HUFs have a maximum investment cap of 4 kg of gold per fiscal year, which can be invested across various tranches during the financial year. This limit also applies to secondary market purchases. These investment limits are in place to manage excessive gold investments, considering the asset’s volatility.
Redemption of SGBs is based on the simple average of the closing price of gold with 999 purity over the previous three working days, reported by the India Bullion and Jewellers Association Ltd (IBJA). These bonds mature after eight years and can be redeemed prematurely from the fifth year, subject to a penalty. Early redemption penalties start at 1% of the bond’s nominal value in the first year and decrease to 0.5% in subsequent years.
SGBs offer an attractive investment opportunity for those seeking exposure to gold, backed by government support and a fair return mechanism tied to gold prices.
Investors should be mindful of these details, including investment limits and redemption terms, when considering the SGB scheme for their investment portfolio.