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Introduction
The Sovereign Gold Bond Scheme was launched by the Indian government to allow the investors to receive investment returns that are linked to the price of gold. Vijaya Bank Sovereign Gold Bond Scheme can be utilised as collateral for obtaining loans.
One of the biggest benefits associated with this particular scheme is that it is transparent and is regulated by the Reserve Bank of India. As an alternative to investing in gold, Vijaya Bank, one of the leading banks of India, offers the facility to invest in a special scheme known as Sovereign Gold Bonds or SGBs, which are essentially government securities that are designated in grams of gold.
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
About Vijaya Bank Gold Deposit Schemes
Features and Benefits of Vijaya Bank Sovereign Gold Bonds
Some of the key features of sovereign gold bonds offered by Vijaya bank are as follows:
- These bonds carry a sovereign guarantee, based on the redemption amount and also the interest.
- The Sovereign Gold Bond Schemes can be best described as government securities and are denominated in units of grams of gold.
- 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.
- They are issued by the Indian government on behalf of the RBI. Vijaya 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.
- It is available in the form of DEMAT as well as paper.
Benefits of Vijaya bank Sovereign gold bonds are as follows:
- By investing in Sovereign Gold Bonds, one can avoid the risk associated with physical gold, except the market risks. There are also no hefty designing charges or TDS involved.
- There is also a guaranteed annual interest to be earned at the rate of 2.50% (on the issue price), this is the most recent fixed rate.
- In case the bond is transferred before maturity, you can get indexation benefits. There is also a sovereign guarantee on the redemption money as well as on the interest earned.
- Trading of gold sovereign bonds can be done 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
For Sovereign Gold Bond Schemes, the interest rate is fixed 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
Sovereign Gold Bonds can be obtained by an Indian resident (as defined under the Foreign Exchange Management Act, 1999). Individuals, universities, Hindu Undivided Families (HUFs), Charitable Institutions, Trusts are among the eligible bodies who can apply for a Sovereign Gold Bond Scheme. Additionally, minors who are interested to invest in this scheme may do so by asking the guardian to submit an application on their behalf.
Why Invest in Sovereign Gold Bonds?
- SGB is a good alternative for gold in physical form.
- 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.
- Issues such as making charges and purity in the case of gold in jewellery form can be avoided by investing in Sovereign gold bonds.
- The bonds are issued by the Reserve Bank of India on behalf of the government.
- These are distributed through Vijaya bank among many other banks and designated post offices.
Documents Required
Mentioned below is the list of documents that are required to be furnished by investors as proof of identity while applying for a Vijaya 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.Can I transfer my bond to another investor or gift them to someone?
Yes, you may transfer the bond to another eligible investor. If you wish to gift a Sovereign Gold Bond to a family member or friend, you can do so. However, the transfer of the bond can only be done if the person meets the eligibility criteria.
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.Where can investors get the application form?
The application form will be provided by the issuing banks/designated Post Offices/agents. It can also be downloaded from the RBI’s website. Banks may also provide online application facilities.
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.
7.Can I apply online?
Yes. A customer can apply online through the website of the listed scheduled commercial banks.
End Note
Sovereign Gold Bond - SGBs are Government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to apply for the issue price fixed by the Government. The bonds will be redeemed on maturity. Sovereign Gold Bonds are issued by RBI, in both Demat and paper form, on behalf of the Government of India. The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gm.
