Sovereign Gold Bonds

Sovereign Gold Bonds (SGB)

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Gold is one of the most trusted and most using Investment tool by the Indians for many years. But the physical gold is always a headache for many Investors. because the storage is difficult and the theft threat. also the additional expenses like making costs are making gold costlier than its raw price. for overcoming this problem the government Introduced a new investment scheme called Sovereign Gold Bonds. SGB was launched in 2015 in November under the Gold monetization scheme. SGB made gold investing very easy and more trustworthy. because SGB is a government-controlled investment and it is regulating by the RBI(Reserve Bank of India).

What is Sovereign Gold Bonds

Sovereign gold bonds are RBI regulating certificates issuing against grams of gold, which will allow individuals to invest in gold without the strain of safekeeping their physical assets. Sovereign gold bonds Are a secure investment tool because gold prices are fewer Influenced by market fluctuations. Owing to the popularity and widespread demand for gold, prices of such assets tend to rise significantly over time, a highly prospective investment avenue.

Since these bonds are issuing by the RBI under the Government of India, a particular window is pre-set for subscription, during which a sovereign gold bond scheme is issued in the name of investors in tranches. Generally, the RBI announces the issuance of the latest sovereign bonds on their official press release. Investors can subscribe to this scheme during the subscription. A holding certificate will be issued in the name of an investor upon the successful purchase of a sovereign gold bond.

Features of Sovereign Gold Bonds

Sovereign Gold Bonds comes with many features. Following are the some Important features of the SGB.

Updated price

The prices of a sovereign gold bond are calculating through a simple average of the closing prices of 999 purity gold for the last 3 days set by the Indian Bullion and Jewelers Association Limited (IBJA).

Periodic interest pay-outs 

A coupon rate of 2.5% per annum is associated with the sovereign gold bond scheme, which is disbursed half-yearly to investors.

Fixed Investment period

Sovereign Gold Bonds are issuing for a period of 8 years. also premature withdrawal option is available from the 5th year. most importantly investors can sell their SGB in the secondary market at the market rate of gold.

Subscription Quantity

Investment in the SGB are calculating in GRAMS of gold. The minimum investment is the price of 1 gram of gold, and the maximum limit is equal to the value of 4kg of gold for individuals and Hindu Undivided Families (HUF). For corporations and trusts, the upper limit is 20kg.

Premature withdrawal

Investors who need to withdraw the SGB can do so after a mandatory holding period of 5 years. This payout benefit will be exercise for the 5, 6, and 7th year of the bond period, and will process on the interest disbursement days.


The Investor can trade their  SGB in the secondary market, subject to the notice publishing by the RBI. The prices depend on the prevailing gold prices on the demand date, as well as its corresponding demand and supply in the stock market. Importantly, for transactions in the stock market, a holding certificate has to be digital and stored in a Demat account of the Investor.

Advantages of Investing in The Sovereign Gold Bonds

  • SGB is a highly transparent and safe scheme since it is coming from the Government of India.
  • We can convert our SGB to the Demat account.
  • The SGB can use as collateral for loans.
  • Includes Tax benefits.
  • Can make payment through DD, cheque, net banking.
  • Comparatively Low risk.
  • Capital appreciation.
  • Hedge against inflation.
  • Long term investment.

Who Can Invest in Sovereign Gold Bond Schemes

Sovereign Gold Bonds is one of the most profitable investment schemes in the market due to its good benefits and lesser restrictions. The investors who are having low risk-appetite but want a good return on their capital investment can choose the Sovereign Gold Bond Schemes. The SGB is one of the safest and assuring returns giving scheme which is regulating by the government of India.

most importantly SGB is apt for the Investors who are aiming to diversify their investment portfolio. In case of a sudden market fall, and loss happens from other investments, SGB will help you to balance your portfolio. also if the value of gold increases, that will help the Investor to compensate for the overall risk involving in his entire portfolio.

Eligibility for Sovereign Gold Bond Scheme

Peoples who are showing interest in the SGB scheme must satisfy the following eligibility criteria. and should have the KYC documents.

  • Indian resident – This scheme is open only for Indian residents, with the Foreign Exchange Management Act of 1999 formulating the eligibility criteria.
  • Individuals/groups – Individuals, associations, trusts, HUFs, etc. are eligible for the SGB scheme, (Indian residents)
  • Minors – parents can purchase SGB on behalf of minors.

How to invest in Sovereign Gold Bonds

To invest in the SGB, you can fill in the application form issuing authority. also, you can download the application from the website of the Reserve Bank of India. Many banks including State Bank of India and Kotak Mahindra Bank offer the online SGB subscription facility. so you can invest online also. There will be a discount of ₹50 per gram for investors who applies online. all applicant must provide their PAN number issued by the Income Tax Department of India. The SGB is available on the selected branches of the nationalized Banks, scheduled private banks, designated Post Offices, etc.

Final thoughts

Sovereign Gold Bond is one of the safest and returns assuring investment tool. it is very transparent since it is regulating by the government of India. SGB reduces the risk of physical gold keeping. and it helps to diversify an investor’s portfolio. In this post, we discussed Sovereign Gold Bonds and its benefits. I hope this post will give an idea about SGB. investing in the Sovereign Gold Bond is purely your personal choice. make a good study before you make an investment in the SGB.

Happy Investing.

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