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Introduction
State Bank of India offers Sovereign Gold Bond which is considered to be the most profitable form of gold investment. This investment scheme is issued tranches and therefore it is not necessarily available all year round. The first batch of the gold bond was issued in November 2015. Post offices along with SBI are the primary channels selling gold bonds considering the wide outreach that each carries.
About State Bank of India Gold Deposit Schemes
SBI Sovereign Gold Bond - Features and Benefits
Some of the key features of sovereign gold bonds offered by SBI are as follows:
- Investors can choose to buy gold bonds in place of physical gold.
- The gold bond prices are generally linked to the price of gold.
- Bond purchase price and selling price is based on the prevailing market price of gold.
- If the gold value rises, the gold bond value also rises. It is similar to owning gold in physical form or gold coins and bullion.
- Besides the prevailing rate of gold, you will also earn an interest which is paid half-yearly. The current rate of interest on gold bonds is set at 2.75% per annum.
- The issue price of the bond is set at gold’s market value of the previous week.
- The tenure is 8 years and premature redemption is allowed after 5 years.
- The sovereign gold bond is similar to any other government bond, but it has a higher appeal and a wider reach.
- The gold bond can be transferred to another person for which you will have to fill up the Form F. The transferee will have to fill the application form, nomination form and fulfil the KYC formalities.
- The bond can be sold to another person in the bond market. RBI will notify when the trading can start. In order to trade the bond, you will have to retain it in Demat form.
Benefits of SBI Sovereign gold bond are as follows:
- SBI Sovereign gold bond can be bought online and the purchase of the same is relatively easy.
- This form of bond does not necessitate safekeeping as it is in a digital form and therefore free from theft.
- You can earn interest on the gold bond, but having physical gold doesn’t offer you interest.
- This bond assures an investment in gold as against investment in physical gold which could sometimes end up being impure.
- Gold bonds don't charge any expenses.
- You can also take a loan against the gold bond.
How to Buy SBI Sovereign Gold Bond
Sovereign gold bonds are issued twice in a year and there is no specific timeline for the same.
The Sovereign Gold Bond can be bought from any SBI branch. To subscribe to the gold bond, investors must use the Kuber core banking system of RBI. The following are the steps to buy gold from SBI:
- The Sovereign Gold Bond forms are available online which can be printed and filled in.
- You will be required to fill 3 forms for the initial subscription. Form A is the main subscription form where you will have to give your personal details and specify the subscription amount. Form B is meant for acknowledgement, the bank officer will give you this form to fill the subscription details. Form D is meant for nomination and it must be submitted along with Form A. If you want to cancel the nomination, you have to use Form E.
- The forms have to be submitted along with your identity and address proof to complete the KYC formalities.
- If payment is being made via cheque, you have to cross the cheque. You can also pay through cash, demand draft and electronic fund transfer. The cheque and demand draft must be in the name of the respective branch of State Bank of India.
- Submit all the forms along with the required documents to the branch.
- After the details have been verified, you will receive Form B, which is the acknowledgement receipt.
- To subscribe for gold, you will have to go to the branch and the SBI official will access the e-Kuber system of RBI and upload your data and an immediate confirmation will be provided.
- RBI generates the holding certificates for the subscription which the bank will download and get it printed after which it will be sent to the investors.
- If the investor has requested for a Demat account, the securities will be credited to the investor's Demat account on the allotment date.
Interest on SBI Sovereign Gold Bond
SBI Sovereign Gold Bond earns interest unlike gold ETF and physical gold. Every 6 months, interest is payable on the bond and is credited directly to the account information provided. The RBI will pay interest directly without any middle intervention or involvement of SBI. Interest is calculated on the initial investment made in the Sovereign Gold Bond Scheme. The final instalment of interest earned will be paid with the maturity amount.
- Servicing – For any form of changes to be made to the details you provided under the Sovereign Gold Bond, you can approach any SBI branch and furnish your request. You can change your address, nomination, and so on. If you want to withdraw your bond prematurely, you can contact your bank.
- Redemption - Redemption of gold bonds can be done after completion of 8 years from the start of the tranche. The redemption value will be transferred to your bank account along with the last instalment of interest. You will be intimated about the redemption one month before completing 8 years by the SBI branch. The value of the gold upon redemption will be based on the price of gold in the previous week.
- Transfer – It is easy to transfer gold bonds from one person to another. To apply for a transfer, you need to fill up the relevant form and submit it to SBI. The person to whom the bond is being transferred is required to fill up the relevant application form, nomination form and must fulfil the KYC norms set out under the Sovereign Gold Bond Scheme. Upon successful completion of the transfer procedure, the bond gets transferred.
- Trading - The Sovereign Gold Bonds can be traded in the bond market and sold off to an interested buyer. The RBI notifies bondholders when the markets will open for trading. To be eligible to trade the bond, you need to maintain it in Demat form. It can be held within any Demat depositary of yours such as stocks in CDSL and NSDL. If you need to convert your bonds to Demat form, simply apply for the same at the depositary. The SBI does not play a role in the trading aspect of the sovereign gold bonds.
- Forms - All forms related to the Sovereign Gold Bond Scheme are available at SBI branches. To save time and hassle, the forms are also available online. These forms can be downloaded, printed and filled out to save time at the SBI branch. Banks are permitted to put their own branding on the forms. The physical copy of the form is maintained at the bank branch.
FAQs
1. What are the risks associated with investing in SGBs?
If the market price of gold declines and the market value of gold is low at the time of redemption, then there is a risk of capital loss. The investor will not lose in terms of the units of gold purchased.
2.Can I buy 500 grams worth of SGBs every fiscal year?
Yes, you can buy the maximum limit of SGBs every fiscal year. The limit is only on a yearly basis.
3.I have applied for SGBs, does this mean guaranteed allotment?
After applying for SGB, if you meet the eligibility criteria and provide a valid identification document along with the application money on time, you can be assured of your allotment.
4.When will I be issued a Holding Certificate?
Certificate of Holding is issued on the date of issuance of the SGB. Certificate of Holding can be collected from the issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents or obtained directly from RBI on email if the email address is provided in the application form.
5. What do I have to do if I want to exit my investment?
In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent thirty days before the coupon payment date. Request for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer’s bank account provided at the time of applying for the bond.
6. What is the benefit of the SGB upon redemption?
On the maturity date, you will receive the following:
- The prevailing market value of grams of gold initially invested (In Indian Rupees).
- Last instalment of interest earned on the initial investment.
End Note
State Bank of India account holders can avail a number of schemes related to gold loans and investments. Apart from purchasing gold coins, an investor can also buy Sovereign Gold Bonds and Gold Mutual Fund Schemes. Sovereign gold bonds are an ideal choice for investors who are looking for safe avenues of investment.
