{"id":33833,"date":"2022-12-17T12:21:52","date_gmt":"2022-12-17T06:51:52","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=33833"},"modified":"2025-04-20T02:02:41","modified_gmt":"2025-04-19T20:32:41","slug":"sovereign-gold-bond-scheme","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/sovereign-gold-bond-scheme\/","title":{"rendered":"Sovereign Gold Bond Scheme"},"content":{"rendered":"<h3><strong>What\u2019s in today\u2019s article?<\/strong><\/h3>\n<ul>\n<li><strong>About SGB Scheme (Background, Meaning, Working, Benefits, Criticism)<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Why in News?<\/strong><\/h2>\n<ul>\n<li>The Reserve Bank of India (RBI) has announced the <strong>Sovereign Gold Bond Scheme 2022-23 \u2013 Series III<\/strong>, which will be open for subscription during December 19-23, 2022.<\/li>\n<li>The issuance price of the Bond during the subscription period will be <strong>Rs 5,409 per gram<\/strong>.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What is Sovereign Gold Bond Scheme?<\/strong><\/h2>\n<ul>\n<li>Sovereign Gold Bonds or SGBs are government securities issued by the RBI on behalf of the Government of India.<\/li>\n<li>SGBs are <strong>denominated in grams of gold<\/strong>. They are substitutes for holding physical gold.<\/li>\n<li>Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>How does the Scheme work?<\/strong><\/h2>\n<p><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/ZSmsMdThpKV42ByylqT5OKMx7kng2H3RqZY8NPBlQ3t3iMKdJ1pKcO7ZiRkISgBOaH06dE1ykpR3m4NIcUsFbO90iWsTt5kx0N7kK5vKDBzhBmCOYGYg8DKETlifmSOnjDu8g9DvPgFZDQzBd2IZDg\" alt=\"\" \/><\/p>\n<p>Image Caption: Features of Sovereign Gold Bond Scheme<\/p>\n<ul>\n<li>SGBs were introduced by the Government of India in <strong>2015<\/strong> under the <strong>Gold Monetization Scheme<\/strong>.<\/li>\n<li>They are issued by the RBI in different tranches during a financial year.<\/li>\n<li>These securities are made available via banks, brokers, post offices and online platforms.\n<ul>\n<li>A discount of INR 50 per gram is offered to investors who purchase them digitally to promote buying SGBs online.<\/li>\n<\/ul>\n<\/li>\n<li>Investors can either buy the bonds in physical, digital or dematerialized format.<\/li>\n<li>SGBs have a <strong>term of eight years<\/strong> and an <strong>interest rate of 2.5% per annum<\/strong> paid on a half-yearly basis.<\/li>\n<li>On maturity i.e. after 8 years, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of previous 3 business days.\n<ul>\n<li>Early encashment\/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates.<\/li>\n<\/ul>\n<\/li>\n<li>Every <strong>individual purchase is restricted to a maximum of 4kgs<\/strong> per financial year and in case of a trust, it is restricted to 20kgs.<\/li>\n<li>The only document mandatory for the purchase of SGBs is a PAN card without which no investment in these bonds is permitted.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What are the benefits of SGB?<\/strong><\/h2>\n<ul>\n<li>The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption\/ premature redemption.<\/li>\n<li>The SGB offers a superior alternative to holding gold in physical form as the <strong>risks and costs of storage are eliminated<\/strong>.<\/li>\n<li>Investors are assured of the market value of gold at the time of maturity and periodical interest.<\/li>\n<li>SGB is <strong>free from issues like making charges and purity in the case of gold in jewellery form<\/strong>.<\/li>\n<li>The bonds are <strong>held in the books of the RBI or in demat form eliminating risk of loss of script etc<\/strong>.<\/li>\n<li>SGBs are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC).<\/li>\n<li>The bonds are <strong>tradable from a date to be notified by RBI<\/strong>. The bonds can also be sold and transferred as per provisions of Government Securities Act, 2006.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What is the criticism of Sovereign Gold Bond Scheme?<\/strong><\/h2>\n<ul>\n<li><strong>Maturity Period \u2013<\/strong>\n<ul>\n<li>A lot of investors are discouraged by the gold bonds because of long maturity period of 8 years.<\/li>\n<li>The government has kept the maturity long in order to prevent gold price volatility resulting in losses for the investors.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Risk of Capital Loss \u2013<\/strong>\n<ul>\n<li>Investment in SGB can result in a capital loss as the bond value is directly linked to the price of gold in the international markets.<\/li>\n<li>If the price at which you buy the bond is higher than the price at which you redeem it at maturity, you might end up in a loss.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Performance of the scheme<\/strong><\/h2>\n<ul>\n<li>The government has issued gold bonds for <strong>96,283 kg<\/strong> (96.28 tonnes) in 61 issuances <strong>since 2016-17<\/strong>, which is worth Rs 52,080 crore at the current market price.<\/li>\n<li>Investors have made premature redemption of 876 kg of gold bonds so far.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1) What is the maturity period of Sovereign Gold Bond?<\/strong><\/h3>\n<p>SGBs have a term of eight years and an interest rate of 2.5% per annum paid on a half-yearly basis.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Q2) What is the meaning of dematerialised format?<\/strong><\/h3>\n<p>Dematerialisation is a process through which physical securities such as share certificates and other documents are converted into electronic format and held in a Demat Account.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p><strong>Source:\u00a0<\/strong><a href=\"https:\/\/www.thehindu.com\/business\/Industry\/sovereign-gold-bonds-a-substitute-for-physical-gold\/article31603727.ece\" target=\"_blank\" rel=\"nofollow noopener\"><u>Sovereign Gold Bonds, a substitute for physical gold<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>SGBs are government securities denominated in grams of gold issued by the RBI on behalf of the GOI.<\/p>\n","protected":false},"author":5,"featured_media":33834,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-33833","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33833","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=33833"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33833\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/33834"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=33833"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=33833"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=33833"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}