SGB Scheme 2022

SGB Scheme 2022

SGB Scheme Series-II 2022-23

Why in News: SGB  Scheme 2022-23 (Series II). In terms of Government of India Notification dated June 15, 2022, SGB 2022-23 (Series II) will be opened for subscription during the period August 22-26, 2022 with Settlement date August 30, 2022. 

Sovereign gold bond scheme(SGB Series-II) : The issue price of the Bond during the subscription period shall be Rs 5,197 (Rupees five thousand one hundred ninety seven only) per gram, as also published by RBI in their Press Release dated August 19, 2022.          

Government of India in consultation with the Reserve Bank of India has decided to allow a discount of Rs 50 (Rupees Fifty only) per gram from the issue price to those investors who apply online and the payment is made through digital mode. 

For such investors the issue price of Gold Bond will be Rs 5,147 (Rupees five thousand one hundred forty seven only) per gram of gold. 

New issue of the government-backed gold bond scheme has opened  and the scheme will remain open for subscription till 26th August 2022. The Reserve Bank of India ((RBI) on behalf of the center has fixed issue price at ₹5,197 per gram. The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognized stock exchanges — NSE and BSE. The tenor of the bond will be for a period of 8 years with an exit option after the 5th year to be exercised on the next interest payment dates.

According to market experts, one should subscribe to the second tranche of the sovereign gold bond scheme as it provided an alternative to gold investment giving an additional return in the form of interest income. They said that is opportune for the investors as the outlook for gold price is positive in the wake of rising global inflation.

Advising gold investors to subscribe to the new tranche of sovereign gold bond scheme 2022, Sugandha Sachdeva, Vice President — Commodity & Currency Research at Religare Broking said, “The latest and the second tranche of Sovereign Gold Bond Scheme 2022-23 is open for subscription from today onwards and would last for five days till August 26.SGB is a great alternative to investing in gold as it not only provides additional returns in the form of interest income, but is also free from default risk, and issues like maintenance, security, and purity. So yes, SGB would be the right choice for investors, who look for steady and hassle-free investment in gold.”

Echoing Sugandha Sachdeva’s views, Megh Mody, Commodities & Currencies Research Analyst at Prabhudas Lilladher said, “Gold is considered a hedge against inflation and in India, demand for gold is going to stay. Long term investors will buy gold whether it is physical or sovereign gold bond. With geopolitical worries and inflation still not controlled across the globe, one can subscribe to the new tranche of sovereign gold bond scheme 2022.”

Sovereign gold bond scheme benefits

Giving ‘subscribe’ tag to sovereign gold bond scheme, Nirpendra Yadav, Sr. Analyst — Commodity Research at Swastika Investmart listed out the following benefits of the gold bond scheme:

1] You will receive 2.5 per cent interest rate every year;

2] No expenses or other charges like ETF and Mutual funds; and

3] Guaranteed by the Government of India.

“Apart from the above-mentioned benefits, Sovereign Gold Bond prices are linked with Gold prices which most of the time rise on uncertainty, War, Pandemic, or any natural calamity. So investors get the benefit of Gold prices along with interest on their investment,” said Nirpendra Yadav of Swastika Investmart.

“It is an opportune time to invest in Sovereign Gold Bonds, as the overall outlook for gold is positive with elevated inflationary pressures worldwide working as a key tailwind for the precious metal. Besides, worries about a global economic slowdown and lingering geopolitical risks will keep gold in demand for its safe haven status. Even as there may be short-term volatility in prices owing to the concerns about the monetary tightening path of the US Fed, the US central bank is likely to slow down the pace of rate hikes, considering its impact on the economic growth that will underpin gold prices. 

Rising central bank gold purchases and upcoming festival demand will further support gold prices,” said Sugandha Sachdeva of Religare Broking adding, “Considering the macro-economic backdrop, gold is a safe and steady investment and a great tool to diversify one’s portfolio for better risk-adjusted returns over the long run.”

On gold price outlook, Megh Mody of Prabhudas Lilladher said, “MCX Gold has an overhead supply placed at ₹52,500, the yellow metal can plunge below ₹50,000 and reach in the zone of ₹48,500 levels. In the next one year it is likely to remain in the range of ₹48,500 to ₹52,500 levels. Comex Gold has a crucial support placed at $1,680 per ounce levels. Breaching of this level can sink prices near to $1,560 levels. For a couple of years it will be below $1,700 and can remain in a range of $1,450 to $1,550 levels.”

Sovereign gold bond scheme details:

The minimum permissible investment limit in sovereign gold bond schemes is 1 gm of gold whereas maximum limit of subscription is 4 KG for individuals, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March).

The central government, in consultation with the Reserve Bank of India, has decided to offer a discount of ₹50 per gram, less than the nominal value, to those investors applying online and the payment against the application is made through digital mode.

The price of the bond is fixed in Indian currency on the basis of a simple average closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited for the last 3 working days of the week preceding the subscription period.

Sovereign Gold Bond Scheme: Was launched by Govt in November 2015, under Gold Monetization Scheme. Under the scheme, the issues are made open for subscription in tranches by RBI in consultation with GOI. RBI Notifies the terms and conditions for the scheme from time to time. The subscription for SGB will be open as per the following calendar. The rate of SGB will be declared by RBI before every new tranche by issuing a Press Release.

As per RBI instructions “Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to the investor(s)’’ as the PAN number of the first/ sole applicant is mandatory.

Features

  • To be issued by Reserve Bank India 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 gram.
  • The tenor of the Bond will be for a period of 8 years with exit option in 5th, 6th and 7th year, to be exercised on the interest payment dates.
  • Minimum permissible investment will be 1 gram of gold.
  • The maximum limit of subscribed shall be 4 KG for individuals, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal year (April-March) notified by the Government from time to time. A self-declaration to this effect will be obtained. The annual ceiling will include bonds subscribed under different tranches during initial issuance by the Government and those purchased from the Secondary Market.
  • In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.
  • RBI will issue a Press Release stating issue price of the Bond before new Issue. Price of Bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewelers Association Limited (IBJA) for the last 3 business days of the week preceding the subscription period.
  • Payment for the Bonds will be through cash payment (up to a maximum of Rs. 20,000/-) or demand draft or cheque or electronic banking.
  • The Gold Bonds will be issued as Government of India Stocks under Government Security Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into Demat form.
  • The redemption price will be in Indian Rupees based on the simple average of closing price of gold of 999 purity of previous 3 working days published by IBJA.
  • All the branches of the State Bank of India are authorized to accept the subscription
  • The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
  • Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loans mandated by the Reserve Bank from time to time. The lien on the bond shall be marked in the depository by the authorized banks.
    Note : The loan against SGBs would be subject to the decision of the bank/financing agency and cannot be inferred as a matter of right.
  • Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.

plutus IAS current affairs eng med 25th August 2022

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