Sovereign Gold Bond (SGB)

SGBs (Sovereign Gold Bonds) are issued by the Reserve Bank of India on behalf of the government of India. SGBs are government securities whose denomination is in grams of gold. SGBs are a substitute for holding physical gold. Investors pay the issue price in cash and the bonds are redeemed in cash upon maturity.

Here are some of the many benefits of investing in Sovereign Gold Bonds (SGBs):

1. The quantity of gold bought remains protected as you get the current market price at the time of redemption/premature redemption
2. The risks and costs of holding gold in physical form are eliminated
3. Additionally, you get periodic interest when you invest in SGBs
4. Unlike physical gold, there are no concerns with the purity of the gold as they are held in bonds
5. SGBs are held in dematerialized form with the Reserve Bank of India. This eliminates the risk of loss or theft

The bonds bear an interest at the rate of 2.50 percent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.

People who are residents of India as defined under the Foreign Exchange Management Act, 1999 are eligible to invest in SGBs.

Eligible investors include:

• Individuals
• HUFs (Hindu Undivided Family)
• Trusts
• Universities
• Charitable Institutions

Individual investors whose residential status changes from resident to non-resident may continue to hold SGBs till early redemption/maturity.

The Bonds are issued in denominations of one gram of gold and in multiples thereof. The minimum investment in SGBs shall be one gram. The maximum limit of subscription depends on the category of investor and are as follows:

• 4 Kgs for an individual
• 4 Kgs for a Hindu Undivided Family (HUF)
• 20 Kgs for trusts and similar entities notified by the government from time to time per fiscal year (April – March).

In the case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by the government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions

Yes, each family member can buy the bonds in his/her own name if they satisfy the eligibility criteria:

People who are residents of India as defined under the Foreign Exchange Management Act, 1999 are eligible to invest in SGBs.

Eligible investors include:

• Individuals
• HUFs (Hindu Undivided Family)
• Trusts
• Universities
• Charitable Institutions

Individual investors whose residential status changes from resident to non-resident may continue to hold SGBs till early redemption/maturity.

If you meet the eligibility criteria and submit the application successfully online, you will be allotted shares.

The nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.

To purchase sovereign gold bonds, you should keep funds in your trading account by making a deposit using the various modes of payments allowed by Kotak Neo.