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SGBs can be used as collateral for loans. (Representative Image)
The Centre with consultation with Reserve Bank of India (RBI) has decided to issue another four tranches of sovereign gold bond (SGB) 2021-22 between October and March, 2022. With these four, the total number of tranches issued this year will touch 10. Under the series, bonds were issued already in six tranches from May 2021 to September 2021. Any individual, trust, charitable institutes and others can apply for these bonds.
VII-X tranche
The subscription period for 2021-22 series VII will be October 25 to October 29. The bonds will be issued on November 2, the finance ministry said in a statement.
From next Monday any individual can buy SGB as per his/her choice. The rate of the bonds will be fixed on Saturday.
The other three series will be issued on November 29–December 3, January 10-14 and February 28–March 4.
The date of issuance of tranche VII to trench X will be on November 2, December 7, January 18 and March 8 respectively.
Previous performance
A total of Rs 25,702 crore was raised through the SGB since its inception in November, 2015 till March, 2021. RBI had issued 12 tranches of SGB for an aggregate amount of Rs 16,049 crore during 2020-21.
The scheme was launched in November 2015 with an objective of reducing the demand for physical gold.
As per the latest available data government has received more than Rs 5,000 crore through first two trenches in FY 2022.
Bond price, tenure
The price of the bond is fixed in Indian rupees on the basis of a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewellers Association (IBJA) for the last three working days of the week preceding the subscription period.
The bonds are denominated in grams of gold with a basic unit of 1 gram. The tenure of the bond is eight years with an exit option after the fifth year to be exercised on the next interest payment dates.
After the maturity period, the investor would be paid by the issuing authority equal to the current gold price.
The maximum limit of subscription shall be 4 kg for individual, 4 kg for HUF and 20 kg for trusts and similar entities per fiscal year.
The investors will be awarded at a fixed rate of 2.50% per annum payable semi-annually on the investment value.
Loan facility
SGBs 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 RBI from time to time, i.e. maximum 75%-80% of the total gold value.
The holding gold under SGB scheme would be entirely on paper format.
Where to buy
The bonds will be sold through scheduled commercial banks (except small finance banks and payment banks), Stock Holding Corporation of India, designated post offices and NSE and BSE.