The government in consultation with the Reserve Bank of India will issue its tenth series of Sovereign Gold Bonds 2020-21 (Series X). The issue will open for subscription from January 11 to January 15, 2021 with 19 January 2021 as its settlement date.
The issue price for the sovereign gold bond has been fixed at Rs 5,104 per gram of gold
As per the RBI's directive, buyers of sovereign gold bond applying online and making payment through digital mode will get a discount of Rs 50 per gram. For such investors, the issue price of the sovereign gold bond will be Rs 5,054 per gram of gold.
The issue price for the bonds (Series IX), which were open for subscription from December 28, 2020, to January 1, 2021, was Rs 5,000 per gram of gold.
Sovereign gold bond 2020-21 has been issued by RBI on behalf of the Government of India.
First launched in 2015, the government's sovereign gold bond scheme's objective was to reduce the demand for physical gold, by shifting the purchase of gold into financial savings. The yellow metal is considered to be a less risky asset during times of economic turmoil.
Gold bonds offer an annual interest rate of 2.50% per annum on the issue price to investors, which is paid half-yearly. One can trade gold sovereign bonds on stock exchanges within a specific date. They are a substitute for investment in physical gold. Gold bonds can be used as collateral for loans.
Gold ETFs, or exchange-traded funds, come with a tenor of 8 years, and a lock-in period of 5 years. The maximum limit of subscription shall be 4kg for individuals and HUFs and 20kg for trusts and similar entities per fiscal year. Bonds are denominated in multiples of gram(s) of gold. The minimum investment limit in gold bonds is one gram of gold, where one unit of the bond is equal to one gram of gold. Owing a unit of gold ETF is cheaper than owning one gram of real gold.
The Reserve Bank of India has issued a total of sovereign gold bonds in six tranches from October 2020 to March 2021. As per RBI's Annual Report 2019-20, a total of Rs 9,652.78 crore (30.98 tonnes) has been raised through the sovereign gold bond scheme (37 tranches) since its inception in November 2015.
Investors can buy the SGB schemes through commercial banks, post offices, stock exchanges Bombay Stock Exchange and National Stock Exchange, and the Stock Holding Corporation. Investors who can invest in the SGBs include individuals, trusts, charitable organisations, Hindu Undivided Families (HUFs) and universities.