Sovereign Gold Bonds

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold issued by the Reserve Bank of India (RBI) on behalf of the Government of India.

They were first introduced in 2015 as a means to reduce the demand for physical gold and to encourage investments in gold that are more secure and transparent.

SGBs are available for purchase by resident individuals, HUFs, trusts, universities, and charitable institutions. The bonds are issued in denominations of one gram of gold and multiples thereof, with a minimum investment of one gram and a maximum of four kilograms for individuals and HUFs in a financial year.

The price of the bonds is based on the average closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited, for the previous three working days. The bonds have a tenure of eight years, with an option to exit after the fifth year. The interest on the bonds is payable semi-annually at the rate of 2.5% per annum on the nominal value.

SGBs offer several advantages over physical gold, such as no storage and security issues, no making charges, and liquidity through stock exchanges. Additionally, capital gains on redemption of the bonds are exempt from tax if held till maturity, and they can be used as collateral for loans. However, the price of SGBs may be subject to market fluctuations and may not provide guaranteed returns.