Sovereign Gold Bond (SGB)

SGBs represent a unique and excellent investment opportunity for investors seeking a blend of security, stability, and appreciation that is associated with gold. Backed by the Government of India, SGBs are a part of the country's sovereign obligation, providing a safe and rewarding alternative to physical gold. As a financial product, SGBs not only offer the allure of gold investment but also come with added benefits that enhance their appeal to investors.

SGBs is an innovative financial product issued by the Reserve Bank (RBI) on behalf of the Government of India aimed at reducing the demand for physical gold, thereby controlling gold imports and promoting financial savings. SGBs are a superior alternative to holding gold in physical form as the risks and costs of storage related to physical gold are eliminated. Investors are also assured of the market value of gold at the time of maturity and periodical interest.

Investment in SGB

• Denomination & Limits +

  SGBs are denominated in grams of gold, making it easier for investors to relate it to physical gold and to estimate the holdings and performance. When an investor buys an SGB, they are essentially purchasing a specific weight of gold. SGBs are available in denominations of one gram of gold and multiples thereof. The minimum investment starts at one gram, making it accessible to small investors, while the maximum subscription limit is set at 4 kg for individuals and Hindu Undivided Families (HUFs) per fiscal year.

• Pricing +

  SGBs are issued in tranches by the RBI, and the issue price is calculated based on market prices as per the established method. Often, there is a discount for investors who apply online and pay through digital modes.

• Redemption and Premature Exit +

  Although SGBs have an eight-year tenure, they offer liquidity through premature redemption after the fifth year on the interest payment dates. Additionally, SGBs can be traded on stock exchanges, providing an exit route through the secondary market.

• Regular Income +

  The SGBs offer a fixed interest at the rate of 2.50% per annum on the amount of initial investment, which is credited semi-annually, and the last interest is payable on maturity along with the principal.

Why Invest in SGB?

• Security: As SGBs are backed by the Government, they carry minimal risk of default, offering high safety and security to investors.
• Safe: SGBs are financial in nature and are held in the books of the RBI or in demat form, thereby being much safer and eliminating the risk of loss, theft, impurity, quality, etc., associated with physical gold.
• Returns: SGBs provide dual returns - a fixed interest income and potential capital appreciation aligned with gold prices. This is an added advantage, as physical gold does not earn any regular income.
• Cost-Efficiency: Unlike physical gold, SGBs eliminate costs related to storage and security. There are also no making charges, ensuring cost-efficiency and peace of mind.
• Hedge Against Inflation: Gold is traditionally considered a hedge against inflation, and with SGBs, investors can protect their portfolio's value against it.
• Simplicity and Convenience: Investing in SGBs is straightforward, with online applications making the process convenient with a Vrddhi E-Wealth Account. The bonds can be held in dematerialised form, simplifying management and reducing paperwork.

Who should consider investing in SGBs?

• Long-Term Investors: SGBs are ideal for those with a long-term investment horizon looking to accumulate wealth through gold.
• Conservative Investors: SGBs are suitable for those seeking a safe and stable investment with predictable returns. They offer security and fixed-interest income, combined with the potential for gold price appreciation.
• Investors Seeking Diversification: SGBs provide an excellent opportunity to diversify one's investment portfolio. Including gold in the portfolio can reduce overall risk and enhance returns, particularly during market volatility.
• Physical Gold Buyers: Investors, families, and parents who used to invest in physical gold earlier can look at SGBs as an alternative. As seen, there are many advantages over physical gold.