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Introduction

Indian investors are known to consider investing in gold as one of the most traditional and conventional commodities. A couple of years ago, the Government of India came up with Sovereign Gold Bond Schemes as a substitute to offer a way of investment in Gold which has many more benefits for the traditional and the new set of investors.

One of the biggest benefits associated with this particular scheme is that it is transparent and is regulated by the Reserve Bank of India. A Sovereign Gold Bond scheme is an ideal option in cutting down on the storage value of gold and saving the money that is spent on making charges. Since these sovereign gold bonds are government securities, they are much safer than physical gold.

Sovereign gold bonds are issued every month from October 2019 to March 2020. Under this scheme, the issues are offered in tranches by the Reserve Bank of India in consultation with the Government of India.

Sovereign Gold Bonds are the safest way to buy and store gold since it is "E-gold", no physical lockers are required to store it. Bonds are issued by Govt. of India, so it's also the safest way to hold gold. You also get an assured 2.50% p.a. interest every 6 months too.

Features and Benefits of UCO Bank Sovereign Gold Bonds

Uco Bank Gold Deposit Scheme

Some of the key features of sovereign gold bonds offered by UCO bank are as follows:

  • The Sovereign Gold Bond Schemes can be best described as government securities and are denominated in units of grams of gold.
  • They are issued by the Indian government on behalf of the RBI. UCO Bank is one of the banks nominated for disbursement of sovereign gold bonds to investors.
  • Upon investing in Sovereign gold bonds, the investors gain interest based on the gold price in the current market.
  • An additional fixed interest is also payable semi-annually on the amount equating to the value if the investment was made initially.
  • These bonds carry a sovereign guarantee, based on both- the redemption amount and even the interest.
  • The minimum investment that can be made by an individual is equated to 1 gram and a maximum investment of 4 kgs can be made too.
  • It is available in the form of DEMAT as well as paper.

Benefits of UCO bank Sovereign gold bonds are as follows:

  • Sovereign Gold Bonds don’t carry the risks that are associated with physical gold, except the market risks. There are no hefty designing charges or TDS involved.
  • You can earn a guaranteed annual interest at the rate of 2.50% (on the issue price), this is the most recent fixed rate.
  • If you transfer your bond before maturity, then you can get indexation benefits. There is also a sovereign guarantee on the redemption money as well as on the interest earned.
  • You can trade gold sovereign bonds on stock exchanges within a specific date (at the discretion of the issuer). For instance, after completing five years of investment, you can trade them on the National Stock Exchange or Bombay Stock Exchange, among others.
  • Some banks accept SGB as collateral/security against secured loans. Hence, they will treat it as a gold loan after setting the loan-to-value (LTV) ratio to the value of gold. The India Bullion and Jewellers Association Limited determines this.

Interest Rates

Under Sovereign Gold Bond Schemes, there is a fixed rate set by the government. This allows everybody eligible to earn interest on the investment. The current rate specified by the authorities is 2.50% per annum and the interest is paid semi-annually (every six months). This interest rate can be changed as per the policies of the government.

Eligibility Criteria

  • Indian resident – Sovereign gold bonds can be bought only by Indian residents, with the Foreign Exchange Management Act of 1999 formulating the eligibility criteria.
  • Individuals/groups – Individuals, associations, trusts, HUFs, etc. are all eligible to invest Sovereign gold bonds, provided they are Indian residents. Under the scheme, one can jointly invest in bonds with other eligible members.
  • Minors – This bond can be purchased by guardians or parents on behalf of minors.

Why Invest in Sovereign Gold Bonds?

  • Under Sovereign Gold bond schemes, the quantity of gold for which the investor pays is protected. As the investor receives the ongoing market price at the time of redemption of such bonds.
  • SGB also offers an alternative to holding gold in physical form.
  • These bonds are free from issues such as making charges and purity in the case of gold in jewellery form.
  • The bonds are issued from the Reserve Bank of India on behalf of the government.
  • The bonds are distributed through UCO bank among many other banks and designated post offices.

Documents Required

The following documents are required to be furnished by investors as proof of identity while applying for a UCO bank sovereign gold bond. Both, original as well as the photocopy of documents have to be presented at the time of loan application.

  • Aadhaar
  • PAN
  • Passport
  • Voter ID, and
  • TAN

FAQs

1.Can a Minor invest in SGB?

Yes, a minor can apply through his / her guardian. No direct application can be made in this case.

2.If I apply, am I assured of allotment?

Yes, if you make all the compliances correctly you can be sure about the allotment. Such compliances are:

  • Meeting the eligibility criteria,
  • Producing a valid identification document
  • Remittance of application money etc

3.How can I exit my investment in SGB?

For premature withdrawal investors can file a request before 30 days of coupon date to requisite: The time period can further be reduced on request but shall in no case be lesser than one day before the coupon date. On successful processing of the application, payment would be a credit to the registered bank account of the investor.

  • Banks
  • SHCIL
  • Post Offices
  • Agent etc

4.What are the minimum and maximum limit for investment?

The Bonds are issued in denominations of one gram of gold and in multiples thereof. The minimum investment in the Bond shall be one gram with a maximum buying limit of 500grams per person per fiscal year (April – March). In case of joint holding, the limit applies to the first applicant.

5.Can I take a loan against Sovereign Gold Bonds?

Yes, you can take a loan by using these bonds as securities. These bonds can be used as collaterals at banks, financial institutions and other non-banking financial companies.

6.Can I buy 500 grams worth of SGB every year?

Yes. One can buy 500 grams worth of gold every year as the ceiling has been fixed on a fiscal year (April-March) basis.

End Note

Investing in Sovereign Gold bonds through UCO bank can have long term benefits and good returns. It is a good investment in comparison to solid gold form since a significant amount is not lost in making charges when your purpose is not to use the jewellery immediately rather, accumulate funds for future goals.

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