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The Insurance Price Must Be Paid In Cash, And The Bonds Must Be Redeemed In Cash: Sovereign Gold Scheme

Government securities denominated in gold grams are known as Sovereign Gold Scheme. They are substitutes for holding physical gold. The insurance price must be paid in cash, and the bonds must be redeemed in cash at maturity. The bond is issued by the Reserve Bank of India on behalf of the Indian government.

Benefits of Sovereign Gold Scheme

  • Because the investor receives the current market price at the time of redemption/premature redemption, the amount of gold for which he pays is protected.
  • The SGB is a superior alternative to physically keeping gold. Storage hazards and expenses are no longer an issue.
  • Investors are guaranteed the market value of gold at maturity as well as periodic interest.
  • In the case of gold in jewellery form, SGB is free of difficulties such as making charges and purity.
  • The bonds are held in the RBI’s records or in Demat form, which eliminates the danger of scrip loss.

Eligibility criteria to apply for Sovereign Gold Scheme

SGB is open to everyone who is a resident of India as specified by the Foreign Exchange Management Act of 1999. Individuals, HUFs, trusts, universities, and charity institutions are all eligible investors. Individual investors who change residency status from resident to non-resident may keep their SGB until they are redeemed or mature early.

Limits for investment in Sovereign Gold Scheme

  • The Bonds are issued in one-gram gold denominations and multiples thereof.
  • The minimum investment in the Bond is one gram, with a maximum subscription limit of four kilograms for individuals, four kilograms for Hindu Undivided Families (HUF), and twenty kilograms for trusts and similar entities as determined by the government from time to time per fiscal year (April – March).
  • The limit applies to the first applicant in a joint holding. The annual ceiling will apply to bonds purchased from the secondary market as well as bonds subscribed to in various tranches during the government’s initial issuance. Banks and other financial institutions will be exempt from the investment ceiling since they retain collateral.

How to apply for Sovereign Gold Scheme

  • Issuing banks/SHCIL offices/designated Post Offices/agents will provide the application form.
  • It’s also available for download on the RBI’s website.
  • Banks may also offer an online application process.

The procedures involved during redemption

  • One month prior to the bond’s maturity, the investor will be notified of the bond’s upcoming maturity.
  • The maturity funds will be credited to the bank account specified on the record on the maturity date.
  • If any details, such as account numbers or email addresses, change, the investor must instantly notify the bank/SHCIL/PO.

The gold bonds will be denominated in multiples of gram(s) of gold with a base unit of one gramme, according to the scheme’s terms and conditions. The gold bonds will have an eight-year term, but after the fifth year, a premature redemption option will be available.

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Also Read: Monthly Income Scheme (MIS): Central govt. launched an Indian postal service investment scheme


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