Sovereign gold bonds (SGBs), which are issued by the Reserve Bank of India (RBI) on behalf of the government, opened for public subscription from Monday (August 22) and will remain open till Friday (August 26). This is the second tranche of the SGB scheme for the financial year 2022-23 after the first tranche took place in June. Among other benefits, the SGBs can be used as collateral for loans. Check Details:
The Reserve Bank of India in a notification of the bonds said, “Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.”
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The bond is issued by Reserve Bank on behalf of the Government of India.
In a frequently asked question also, it said, “Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loan prescribed by RBI from time to time. Granting loan against SGBs would be subject to decision of the bank/financing agency, and cannot be inferred as a matter of right.”
Who Can Buy the Bonds?
The sovereign gold bonds will be restricted for sale to resident individuals, hindu undivided families (HUFs), trusts, universities and charitable institutions.
How Can You Buy The SGBs?
The bonds will be sold through commercial banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices (as may be notified), National Stock Exchange and BSE, either directly or through agents.
According to a notification by the finance ministry, the issue price of the SGB Series-II during the subscription period will be Rs 5,197. “The Government of India in consultation with the Reserve Bank of India has decided to allow a discount of Rs 50 per gram from the issue price to those investors who apply online and the payment is made through dig
Payment for the SGBs will be through cash payment (up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking. Online payment will get you Rs 50 discount on per-gram of gold.
The tenure of the SGB will be for a period of eight years with an option of premature redemption after fifth year to be exercised on the date on which interest is payable.