The first tranche (series 1) of the Sovereign Gold Bond (SGB) scheme for 2021-22 opened for subscription on Monday at an issue price of Rs 4,777 per gram. A discount of Rs 50 per gram has been provisioned for online subscribers. The SGB scheme offer will close on May 21 and the bonds will be issued on May 25, according to the Reserve Bank of India (RBI).
SGB is issued by the government, for which investors get a holding certificate. It comprises government securities denominated in gold wherein investors are required to pay the issue price in cash.
Who can invest in SGBs?
These are restricted for sale to resident individuals, HUFs (Hindu Undivided Families), trusts, universities and charitable institutions.
How is the price determined?
The price is determined on the basis of a simple average of the closing price 999-purity gold published by the Mumbai-based India Bullion and Jewellers Association (IBJA) for the last three working days of the week preceding subscription.
What are the investment limits?
The minimum permissible amount allowed for investment in SGB is one gram of gold. The maximum subscription limit for SGBs is 4 kgs for individuals, 4 kgs for HUF, and 20 kgs for trusts and similar entities per fiscal (April-March).
Should one invest in it?
According to Nish Bhatt, founder and CEO, Millwood Kane International, investment in SGB tranche-1 makes sense as the bond will be available for a lower price as compared to the current prices of gold.
"Gold prices have been on the rise due to uncertainties created by the second wave of COVID-19 cases, softening of the Treasury yields, and concerns of rising inflation in the US. Gold prices have been trading near a 3-month high. Though the Fed Reserve has assured of low rates in the US for a long period of time, moving forward its commentary on the rising inflation, unemployment, and the impact of the second wave, geopolitical tensions in the middle east will guide gold prices," he believes.
How can one invest in SGBs?
One can invest in SGBs via online banking or through their Demat accounts.
To invest through banks, customers will need to log into their net banking account. The bank page will show the SGB option. It can also be available on the bank’s home page or under services.
SGB application forms ask for name, address, guardian’s name in case the investor is a minor, PAN number, and so on
For buying bonds through brokers/exchanges, investors should have Demat and trading account with BSE/NSE. As all details and KYC are already there with traders via Demat accounts, investors just have to select a quantity and submit it online.
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(Edited by : Ajay Vaishnav)
First Published: IST