Sovereign gold bond scheme to open for subscription on Dec 28; here's all you need to know

The ninth tranche of government-run Sovereign Gold Bond (SGB) scheme 2020-21 will open for subscription on December 28, 2020. The series IX of the sovereign gold bond scheme, which is being issued by the RBI on behalf of the central government, will close for subscription on January 1, 2021.

The issue price for the new series of sovereign gold bonds has been fixed at Rs 5,000 per gram of gold, the Reserve Bank of India said on Thursday. Besides, the government will offer a discount of Rs 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode. For such investors, the issue price of Gold Bond will be Rs 4,950 per gram of gold.

"The nominal value of the bond based on the simple average closing price [published by the India Bullion and Jewellers Association Ltd (IBJA)] for gold of 999 purity of the last three business days of the week preceding the subscription period, i.e. December 22 - 24, 2020 works out to Rs 5,000 per gram of gold," the RBI notified.

"Government of India, in consultation with the Reserve Bank of India, has decided to offer a discount of Rs 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode," it added.

The 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.

Here are key things to know before you invest in the Sovereign Gold Bond Scheme Series IX- 2020-21:

• As per RBI's circular, the issue price for the Sovereign Gold Bond has been fixed at Rs 5,000 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 4,950 per gram for such investors.
• The 2020-21 Series IX subscription will be open between December 28, 2020 and January 1, 2021.
• 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.
• 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.
• 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.

Chitranjan Kumar

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