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Sovereign Gold Bond VI scheme opens for subscription: All you need to know

BusinessToday.In     August 31, 2020

The sixth tranche of government-run Sovereign Gold Bond (SGB) scheme 2020-21 opened for subscription today. The series VI of the sovereign gold bond scheme will close for subscription on September 4.

Demand for gold has surged about 41% to fresh life-time highs this year as investors take a backseat from equities in the pandemic-driven market. The rally is expected to continue, as per bullion experts.

Here are the top 10 things to know before you invest in the Sovereign Gold Bond Scheme Series VI- 2020-21:

1. As per RBI's circular, the issue price for the Sovereign Gold Bond has been fixed at Rs 5,117 per gm. Investors, who will apply online or make payments via digital mode will get a discount of Rs 50 per gram less than the nominal value. The issue price has been fixed at Rs 5,067 per gram for such investors.

2. Gold bonds offer an annual interest rate of 2.50% to investors. 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.

3. 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.

4. Gold bonds are meant for sale to resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions. The minimum investment limit in gold bonds is one gram which is equal to one gram of the yellow metal.

5. The maximum limit of subscription shall be 4kg for individuals and HUFs, and 20kg for trusts and similar entities per fiscal year. They have a maturity period of eight years. However, if an investor plans to exit before the lock-in period of 5 years, they can always get out of the bonds by selling them on stock exchanges.

6. This is the sixth tranche of gold bonds of this fiscal year, issued by Reserve Bank of India (RBI) on behalf of the government. The first tranche of sovereign gold bond in the financial year 2020-2021 was open for subscription from April 20 to 24. The issue price for the fifth series of gold bonds stood at Rs 5,334 per gram of gold. The Series V was open for subscription from August 3 to August 7.

7. The 2020-21 Series VI subscription will be open between August 31-September 4, 2020, and will be issued to investors on September 8, 2020.

8. Earlier in April, the central bank RBI had announced the government will issue Sovereign Gold Bonds (SGBs) in six tranches beginning April 20 till September.

9. Considered as a safe haven commodity, price of gold futures extended gains on the commodity exchange MCX and touched Rs 56K mark on the back of spread of COVID-19 virus and the resulting lockdown. Yellow metal on MCX has risen 41.5% to the life-time high since the beginning of the year. Bullion that was trading at Rs 39,000 on December 31, 2019, recently hit a lifetime high of Rs 56,191 per 10 gm on August 7, 2020. The rise of dollar against the rupee has also influenced gold's rate, increasing its retail price in the domestic markets.

10. SGB scheme was launched in November 2015 with an objective to reduce the demand for physical gold and shift a part of the domestic savings, used for the purchase of gold, into financial savings.  The yellow metal is considered to be a less risky asset during times of economic turmoi.

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