Sovereign Gold Bonds scheme 2015 was launched on Thursday by PM Narendra Modi. In all, 3 schemes, including Sovereign Gold Bonds, were opened for purchase by the public. The Sovereign Gold Bonds scheme, like the other two, are aimed at reducing physical gold demand and to bring into circulation in the financial system the whopping 20,000 tonnes of idle yellow metal in Indian homes. As investors will get returns that are linked to gold price, the scheme is expected to offer the same benefits as physical gold – at home people get no returns in terms of income generated from the same. The Sovereign Gold Bonds scheme looks to change that and put extra money into the pockets of the gold-holding public. These bonds can be used as collateral for loans and can be sold or traded on stock exchanges. Here are top 10 frequently asked questions (FAQs) about Sovereign Gold Bonds scheme 2015:
1. Sovereign Gold Bonds scheme 2015: What is Sovereign Gold Bonds (SGB)? Who is the issuer?
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.
2. Sovereign Gold Bonds scheme 2015: Why should I buy SGB rather than physical gold? What are the benefits?
The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.
3. Sovereign Gold Bonds scheme 2015: Are there any risks in investing in SGBs?
There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.
4. Sovereign Gold Bonds scheme 2015: Who is eligible to invest in the SGBs?
Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities, charitable institutions, etc.
5. Sovereign Gold Bonds scheme 2015: Whether joint holding will be allowed?
Yes, joint holding is allowed.
6. Sovereign Gold Bonds scheme 2015: Can a Minor invest in SGB?
Yes. The application on behalf of the minor has to be made by his / her guardian.
7. Sovereign Gold Bonds scheme 2015: 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 facility.
8. Sovereign Gold Bonds scheme 2015: What are the Know-Your-Customer (KYC) norms?
Know-Your-Customer (KYC) norms will be the same as that for purchase of physical form of gold. Identification documents such as Aadhaar card/PAN or TAN /Passport / Voter ID card will be required. KYC will be done by the issuing banks/Post Offices/agents.
9. Sovereign Gold Bonds scheme 2015: What is the minimum and maximum limit for investment?
The Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the Bond shall be two grams with a maximum buying limit of 500 grams per person per fiscal year (April – March). In case of joint holding, the limit applies to the first applicant.
10. Sovereign Gold Bonds scheme 2015: Can I buy 500 grams in the name of each of my family members?
Yes, each family member can hold the bond if they satisfy the eligibility criteria as defined at Q No. 4.