Sovereign Gold Bond: The Sovereign Gold Bond (SGB) Scheme Series III for the fiscal year 2023–2024 has been announced by the Reserve Bank of India (RBI). It is slated to open on December 18 and close on December 22. The notable increase in gold prices, which exceeded a 10 percent gain in 2023 and surprised observers despite a difficult high-interest rate environment, is the driving force behind this release.
RBI’s Announcement on Cost Declaration
The Reserve Bank of India (RBI) will soon declare the cost of this issue. This bond’s value is determined by taking the simple mean of the closing price of 999-purity gold, per the India Bullion and Jewellers Association (IBJA). The closing gold prices for the three working days before the subscription period began are used to compute this average.
Nominal Value Determination
“The nominal value of the bond based on the simple average of closing price (published by the IBJA) for gold of 999 purity of the last three working days of the week preceding the subscription period, i.e. December 13, December 14, and December 15, 2023 works out to be ₹6,199 per gram of gold,” RBI said in a notification on December 15.
Sovereign Gold Bonds (SGBs) as Gold Investment
A respectable substitute for holding actual gold is to invest in Sovereign Gold Bonds (SGBs), which are government securities valued in grammes of gold. The issue price must be paid in cash by investors, who will also get a cash redemption when the investment matures. These bonds, which are issued by the Reserve Bank of India on behalf of the Indian government, provide protection to investors by guaranteeing that they will be redeemed at the current gold market price. Because of this feature, which ensures the value of the initial gold investment, SGBs are a better choice than physical gold.
Flexibility for Individual Investors
Sovereign Gold Bonds (SGBs) can be purchased by anyone who meets the requirements of the Foreign Exchange Management Act, 1999 for residency in India, including individuals, trusts, universities, charitable organisations, and Hindu Undivided Families (HUFs). Individual investors are allowed to keep the SGB until its early redemption or maturity if their residential status changes from resident to non-resident.
Interest Credited Semi-Annually to Investor’s Bank Account
A fixed interest rate of 2.50% annually is available on the initial investment amount of Sovereign Gold Bonds (SGBs). Semi-annually, the interest is credited to the investor’s bank account, and the principal amount invested plus the final interest payment are made at maturity.
SGBs are issued in denominations of one gramme or multiples thereof, with a one gramme minimum investment required. The maximum subscription amount for individual investors is 4 kg per fiscal year (April–March). Investors who are Hindu Undivided Families (HUFs) are subject to the same cap. As per the government’s notification, trusts and comparable entities are subject to a higher maximum limit of 20 kg per fiscal year.
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