This particular scheme was started by the Government of India in 2015 to control the demand for imported gold in the country.
Sovereign Gold Bonds (SGB) are substitutes for holding physical gold. These bonds are approved by RBI and allows individuals to invest in gold without the tension of safekeeping.
This investment scheme is secure because gold prices are less influenced by market fluctuations. There might be a capital loss if the price of gold declines. But due to the huge demand and widespread usage of this precious metal, prices of such products tend to rise over time and therefore are considered a profitable investment.
Features of Sovereign Gold Bond
These are some of the important features of Sovereign Gold Bond –
1. Maturity: This scheme has a maturity period of 8 years. However, one can withdraw after a period of 5 years.
2. Purity: The purity of gold is assured as it is backed by the government.
3. Gift: Investors can gift or transfer these bonds to others.
4. Simple Application: The application process of SGB is easy as banks and post offices are permitted to provide this service.
5. Tradable: These bonds can be traded by investors on stock exchanges.
Advantages of Sovereign Gold Bond
These are some of the main advantages of Sovereign Gold Bond –
1. The current interest rate of SGB is 2.50% per annum.
2. SGB allows tax exemption on redemption value.
3. Low-risk investment with assured returns.
4. Safer means of investments as they are backed by the government.
5. Can be used as collateral for loans.
6. These bonds can also be purchased by parents/ guardians on behalf of minors.