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RBI Sovereign Gold Bonds

Created on 10 Mar 2023

Wraps up in 5 Min

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Updated on 20 May 2023

Investors in India, take note! The clock is ticking as the fourth tranche of the Sovereign Gold Bond Program is now available for subscription, but only for a limited time. The Reserve Bank of India began accepting applications on March 6, 2023, with the subscription window scheduled to close on March 10, 2023. Act fast if you don't want to miss out on this opportunity to invest in SGBs!

Sovereign Gold Bonds (SGBs) are a type of government-issued security in India denominated in grams of gold and backed by physical gold. The Reserve Bank of India (RBI) issues these bonds on behalf of the government in tranches, with a minimum investment of 1 gram of gold and a maximum of 4 kg for individuals as well as for Hindu Undivided Families (HUFs) and 20 kg for trusts and similar entities in a fiscal year.

One advantage of investing in SGBs is that they offer a fixed rate of interest of 2.5% per annum, payable semi-annually, on the invested amount. Moreover, the capital gains from the sale of SGBs are tax-exempt if held until maturity.

Compared to physical gold, SGBs offer the convenience of holding gold in a dematerialised form without the need for storage and also provide an interest income. Furthermore, SGBs eliminate concerns related to purity and theft that are associated with physical gold. However, it is worth noting that SGBs do not offer the same level of liquidity as physical gold, as they cannot be sold or redeemed easily in the market.

In short, SGBs are a good investment option for those looking to invest in gold and earn a fixed rate of interest while avoiding the hassles associated with physical gold.

Last SGB Tranch of 2023

The gold rush is ending real soon!

The Reserve Bank of India (RBI) started accepting applications for the fourth tranche of its Sovereign Gold Bond Program for the fiscal year 2022-23. The latest tranche was made available for subscription on March 6, 2023, and is scheduled to close on March 10, 2023. This means that investors who are interested in purchasing these bonds have a limited window of opportunity to invest in this particular tranche.

The RBI has announced the issue price for the latest tranche of Sovereign Gold Bonds (SGBs) at ₹5,611 per gram of gold. This price is higher than the issue price for the previous tranche, which was set at ₹5,409 per gram of gold. 

Investors who opt to apply for Sovereign Gold Bonds (SGBs) through online channels and pay for their investment electronically are entitled to receive a discount of ₹50 per gram. This discount effectively reduces the issue price of the SGB to ₹5,561 per gram of gold. It's worth noting that this discount is exclusively available to investors who choose the online application and electronic payment option.

How many times are SGBs issued by the RBI in India? 

The Reserve Bank of India (RBI) issues Sovereign Gold Bonds (SGBs) in multiple tranches throughout the year, depending on the demand for gold and the prevailing market conditions. The exact number of times SGBs are issued by the RBI in India can vary from year to year and depend on various factors, such as the market demand for gold, prevailing interest rates, and inflation levels.

Typically, the government of India announces the schedule of SGB issuances for the financial year in advance. In the past, there have been around six to eight tranches of SGB issuances in a financial year. However, the exact number of issuances and the frequency of tranches can vary from year to year.

It's worth noting that the government of India may also introduce new investment options or modify existing ones based on changing market conditions and investor demand. Therefore, it's always a good idea to keep an eye on the official announcements and news related to SGBs to stay updated on the latest developments.

Which is better, SGB or Physical Gold?

Whether SGBs are a better investment than physical gold depends on your investment goals and preferences.

On the one hand, SGBs can give you extra money (as interest) every six months. This means you can earn extra money on top of the value of the gold. 

If you keep these papers until they are finished (meaning if you stay invested in the bond till its tenure of 8 years), you won't have to pay any extra money to the government when you sell them. 

This is because holding the bond till maturity makes you eligible for exemption from capital gains tax on the appreciation in the value of the investment.

Compared to buying physical gold, these papers are easier to keep and are safer since you don't need to worry about losing them or having them stolen. However, you can't sell these papers quickly like you can with physical gold.

Unlike SGB, physical gold is a more liquid investment, which means it is easier to sell quickly in the market. It also provides a more tangible sense of ownership as you can hold it physically, which may be important for some investors.

Can you invest in SGB after the issue window closes?

Investors who miss out on the opportunity to invest in Sovereign Gold Bonds (SGB) during its issuance window do not need to fret, as there's still a chance for you to get in on the action!

Many believe that there's no way to invest in them anymore. However, there are investors who want to opt out of the bonds before the maturity, and cash out early for various reasons, creating a steady supply in the secondary market. 

Additionally, investors may want to take advantage of changes in the market value of gold or interest rates, which can impact the price of the bonds. If there is high demand for SGBs, they may sell at a premium in the secondary market. Conversely, if demand is low, SGBs may sell at a discount.

So, even if you didn't directly invest in the bonds during the issuance window, you could still purchase them in the secondary market.

The Bottom Line

In the end, it's all about what works best for you and your financial goals. If you're someone who loves the idea of holding shiny gold bars in your hand, physical gold may be the way to go. However, if you prefer a more secure investment option that also provides a fixed rate of interest, SGBs may be the better choice. So, whether you choose physical gold or SGBs, make sure you weigh your options carefully and invest wisely.

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Rishabh Kaushik

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Rishabh is a finance enthusiast who is in a love-hate relationship with writing. Armed with a wicked sense of humour, he delivers jokes that land 50% of the time... Every other instance crashes and burns as he does after his lunch. To add more about this guy, he is into absurd comedy, can play the guitar (or so he says), and is a social pendulum.

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