The Reserve Bank of India has re-opened the subscription for the government gold bond scheme for the financial year 2023-24. The issue price for the current tranche is fixed at ₹5923.
SGBs are a state-backed investment instrument that offers investors the opportunity to invest in gold without having to physically hold it.
The bonds are denominated in grams of gold and are priced at a slight discount to the prevailing market price of gold. Investors earn a fixed interest rate of 2.50% per year on the invested amount, which is paid semi-annually.
SGBs are a good investment option for those who want to invest in gold but don’t want to go through the hassle of storing and insuring physical gold.
They are also a good option for those who want to diversify their investment portfolio and reduce risk.
RBI states: “The face value of the bond based on the simple average of the closing price for 999 gold on the last three working days of the week preceding the subscription period, i.e. September 6-8, is Rs 5,923 per gram of gold. “
There is an additional discount of ₹50 for investors who apply for the scheme online and make payments through digital mode.
RBI states: ”Government of India, in consultation with the Reserve Bank, has decided to offer a discount of ₹50/- per gram less than face value to those investors who apply online and make payment with the app through digital mode. For such investors, the issue price of the Gold Bond will be ₹5,873/- (Rupees Five Thousand Eight Hundred and Seventy Three only) per gram of gold.”
What is the Sovereign Gold Bond Scheme?
The Government Gold Bond (SGB) scheme is a government-backed investment scheme that allows investors to buy gold without having to physically hold it. The bonds are denominated in grams of gold and are priced at a slight discount to the prevailing market price of gold.
The SGB scheme was launched by the Indian government in 2015 as a way to encourage investment in gold and reduce demand for physical gold.
How do government gold bonds work?
SGBs are issued by the Reserve Bank of India on behalf of the Government of India. Bonds are available for subscription in tranches throughout the year. The issue price of the bonds is fixed at a slight discount compared to the prevailing market price of gold. The discount is usually around 2.5%.
Investors can buy SGB in multiples of 1 gram of gold. The minimum investment is one gram, and the maximum investment limit for individuals is 4 kg per financial year. Bonds can be held in physical or intangible form.
Interest on SGBs is paid semi-annually at a fixed rate of 2.50% per annum. Interest is calculated annually.
SGBs have a maturity of 8 years. Upon maturity, the investor receives the invested amount, together with the accrued interest. The bonds can also be redeemed before maturity, but the redemption price will be linked to the prevailing market price of gold on the date of redemption.
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Source: vcmp.edu.vn