The Reserve Bank of India (RBI) will issue sovereign gold bonds on Monday as part of the central government’s market-borrowing programme. This will be the second instalment of the sovereign gold bond (SGB) scheme announced by the government.
As gold bonds have a more extended maturity period of eight years, investors see gold as a safer bet during economic concerns. Since equity assets have seen a decline due to the Covid-19 crisis, more number of people are driven towards gold investment. SGB is one of the best alternatives to gold investment as investors get interest in addition to the favour received from the fluctuation of gold prices.
The sovereign gold bond schemes are issued by the RBI and are denominated in multiples of one gram of gold. SGB investors can be individuals, trusts, universities, charitable bodies or Hindu Undivided Families (HUFs).
However, there are certain investment limitations. HUFs and individuals can purchase a minimum amount of 1 gram and a maximum of 4 kilogram gold in a year. Trusts and such bodies can acquire a maximum of 20 kilograms in one fiscal year.
RBI has announced the dates of upcoming installations till September. The SGBs will be sold through specific post offices, commercial banks, stock exchanges BSE and NSE, and the Stock Holding Corporation. The bonds are held in Demat (dematerialized account) format or the record books of RBI.
In the eight years of the lock-in period, investors get to apply for an exit after the fifth year. The interest rate of the gold bond is fixed at 2.5 per cent per annum, which is payable twice a year.
While the first instalment of the SGB 2020-21 series was open for subscription from April 20 to 24, the current issue will be open from May 11 to May 15.
The date of issuance is May 19, 2020.