Interested in financial products
CreditMantri
Processing

Introduction

Federal bank is one of the oldest private sector banks in the country and is a scheduled commercial bank having its headquarters in Kochi, India. The bank is one of the authorized distributors of the Sovereign Gold Bonds issued by the Reserve Bank of India on behalf of the Government of India. These bonds are a financial asset aimed and launched to be a favorable alternative to physical gold.

Features and benefits of Federal Bank Sovereign Gold Bonds

Federal Bank Gold Deposit Scheme
  • The bonds are issued in the denomination of 1 gram of gold and its multiples. The minimum investment that an eligible investor can make under the scheme is one gram and the maximum investment under the scheme for each fiscal year is
  • 4 kg for individuals
  • 4 kg for HUF
  • 20 kg for Trusts and similar entities that are notified by the government from time to time.
  • The bonds in all the tranches will be considered while calculating the annual limit, whether they have been subscribed in the initial issuance of the government or purchased in the secondary market.
  • The tenure of such bonds is 8 years. However, the investors can redeem them before maturity after five years of completion from the date of issue of the bonds. According to the scheme, the payment due in such case will be made on the date of subsequent interest payment. The investor has to contact the bank/post office /agent 30 days prior to the payment on the coupon date. The bank will allow the processing of the request for early redemption if the same is received at least one day before the interest payment date. The credit of the proceeds of redemption received will be credited in the investor’s bank account that he/she has provided at the time of application for the bond.
  • The scheme provides the bonds to be held in physical form or in Demat form.
  • Investors can also file a nomination under the scheme.
  • Investors can make payment for the bonds through cheque/ DD/electronic fund transfer.
  • The redemption price will be in Indian Rupees based on previous week's (Monday-Friday) simple average closing price of gold of 999 purity published by the Indian Bullion and Jewellers Association Ltd (IBJA).
  • The investors can trade the bond in open market provided it is held in demat form and the bonds are also transferable to any other eligible investor.
  • The primary benefit of these bonds is that it reduces the risk and cost of storage of physical gold.
  • The investors also get assured of the value of their investment in terms of the market value of gold at the time of maturity
  • This assurance is over and above the earnings in the form of regular interest on their investment.
  • The scheme also forgoes the need for any additional charges that are involved in purchase of gold in traditional manner like making charges, purity testing charges, etc.

Interest payment of the Scheme

The interest on the Federal Bank-Sovereign Gold bonds is paid at an interest rate of 2.50% (fixed rate) annually on the initial investment made at the time of subscription to the scheme.

The scheme entitles the investor to receive interest payment on half yearly basis which will be credited in the account of the holder that the investor has provided at the time of subscription.

The bank has a policy to pay the last interest along with the payment of the principal amount at the time of maturity of these bonds.

The interest accrued on the bonds is not tax free and shall be taxable at the hands of the investor under the Income Tax Act, 1961.

Eligibility for the Scheme

The eligible applicants for this scheme are the following persons resident in India

  • Individual (either for himself or in the name of a minor or held jointly with another individual)
  • Hindu Undivided Family
  • Trust
  • Charitable Institution

Applicants can download the Sovereign Bond Application Form or the Sovereign Bond Nomination Bond as required form the bank’s website. They can submit the same after duly filling it at the nearest branch of the bank.

Documents Required for the Scheme

The documents required by the bank for application purpose are very basic and similar to those required in line with the KYC norms.

Applicants must submit the basic KYC documents like Voter ID/ Aadhaar card/ PAN or TAN/ Passport.

Customers can contact the customer care of the bank or the website of the RBI to get the further details of the documents required in order to apply for the scheme.

FAQs

1. Does the scheme permit joint holding of the bond?

The scheme has the provision for the customers to jointly hold a bond(s) as per the guidelines of the scheme in this regard.

2.What is the price at which these bonds are sold?

Price of bond is to be fixed in Indian Rupees on the basis of the previous week's (Monday – Friday) simple average price for gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA). The Reserve Bank of India disseminates the issue price. The price of gold for the relevant tranche is to be published by the RBI on its website two days prior to the issue opens.

3. What is the procedure followed for redemption of these bonds?

The issuing bank has to advise the investor one month before maturity regarding the upcoming maturity of the bond. On the date of maturity, the investor will receive the maturity proceeds in the form of a credit to the bank account provided by him/her at the time of application. In case there are changes in any details like account number, email ids, nomination, etc. the investor has to intimate the bank promptly

4.Are the Sovereign Bonds subject to a tax deductible at source?

No. The sovereign bonds are not subject to any tax deductible at source.

5. Is the investor allowed to redeem part holdings?

Yes. The scheme has a provision for the investors to redeem a part of their holding in multiples of 1 gram.

×Thank you! Your comment will be reviewed and posted shortly.

CreditMantri will never ask you to make a payment anywhere outside the secure CreditMantri website. DO NOT make payment to any other bank account or wallet or divulge your bank/card details to fraudsters and imposters claiming to be operating on our behalf.