What is the Sovereign Gold Bond (SGB) Scheme?

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What is the Sovereign Gold Bond (SGB) Scheme? Blog Image


The Reserve Bank of India (RBI) recently announced the issue price for the upcoming Sovereign Gold Bond (SGB) Tranche 2.

About Sovereign Gold Bond (SGB) Scheme:

  • SGBs were introduced by the Government of India in 2015 under the Gold Monetization Scheme.
  • SGBs are government securities issued by the RBI on behalf of the Government of India.
  • They are substitutes for holding physical gold.
  • Features:
    • SGBs are denominated in grams of gold with a basic unit of 1 gram.
    • Investors have to pay the issue price in cash, and the bonds will be redeemed in cash on maturity.
    • Eligible Subscribers: The Bonds will be restricted for sale to resident Indian entities, including individuals (in his capacity as an individual, or on behalf of minor child, or jointly with any other individual), HUFs, Trusts, Universities and Charitable Institutions.
    • Tenor: The tenor of the Bond will be for a period of 8 years with an exit option in 5th, 6th and 7th year, to be exercised on the interest payment dates.
    • Investment Limit:
      • Minimum: 1 gram of gold.
      • Maximum: 4 KG for individuals, 4 Kg for HUF and 20 Kg for trusts.
    • Interest2.5% per annum, paid on a half-yearly basis.
    • The interest on Gold Bonds shall be taxable as per the provisions of the Income Tax Act, 1961.
    • SGBs can be used as collateral for loans.


Q1) What are Government Securities?

Government securities are government debt issuances used to fund daily operations, and special infrastructure and military projects.They guarantee the full repayment of invested principal at the maturity of the security and often pay periodic coupon or interest payments.are considered to be risk-free as they have the backing of the government that issued them.

Source: Sovereign Gold Bond tranche 2 to open on Monday, expert foresees over 20% returns