Everything You Need to Know About SGB Series II

On September 11, 2023, the Reserve Bank of India (RBI), acting on behalf of the Government of India, unveiled the Sovereign Gold Bond Scheme 2023-2024 Series II. In this latest offering, the price has been established at ₹5,923 per gram of gold.

But before that, let’s know everything about Sovereign Gold Bonds Series II.

What are Sovereign Gold Bonds (SGB)?

Sovereign Gold Bond Scheme was launched by the government in November 2015, under the Gold Monetisation Scheme. It represents certificates mandated by the RBI. These are backed by a certain amount of gold, making them a convenient investment option for those looking for exposure to gold without the need to physically safeguard it.

These bonds are a secure and reliable investment choice because gold prices tend to be less volatile compared to other assets. Due to the enduring popularity and consistent demand for gold, the value of these bonds typically appreciates over time, making them a promising avenue for investment.

These bonds are issued by the RBI under the Government of India’s auspices, and they are made available to investors during specific subscription windows. The issuance of sovereign gold bond schemes is usually announced by the RBI through press releases, which occur approximately every 2-3 months. 

During this announcement, a subscription period of less than one week is specified, allowing individuals to participate in the scheme and invest in these bonds.

Sovereign Gold Bonds Series II 2023-24

In an official announcement concerning the details of the Sovereign Gold Bond, the RBI has disclosed that the Sovereign Gold Bond Scheme for the 2023-24 Series II will be available for subscription from September 11 to September 15, 2023. 

The bond’s face value will be determined based on the straightforward average of the closing prices for gold with a purity of 999, as reported by the India Bullion and Jewellers Association Ltd (IBJA), for the last three business days prior to the subscription period. 

Specifically, this average was calculated for the days September 06, September 07, and September 08, 2023, resulting in a nominal value of ₹5,923 per gram of gold.

However, there’s a twist,

SGBs at Discounted Price

These bonds are denominated in grams of gold and can be obtained in increments of one gram. The minimum allowable investment in SGBs is one gram, while there’s a yearly maximum limit of 500 grams per individual within a fiscal year (April to March).

In partnership with the Reserve Bank, the Government of India has decided to extend a ₹50 per gram discount below the face value to investors who opt for online applications and complete their payments through digital channels. For these investors, SGBs will be accessible at an issue price of ₹5,873 per gram of gold.

Investment Details

• SGBs have a fixed tenure of 8 years and provide an annual interest rate of 2.5%.
• This interest is disbursed semi-annually, in June and December. Upon maturity, the bonds are redeemed at the then-current market price of gold.
• The SGB program for the 2023-24 Series 2 will be open for purchase through multiple channels, including banks, the Stock Holding Corporation of India Ltd (SHCIL), designated post offices, and recognised stock exchanges, namely the NSE and the BSE.
• This scheme is exclusively available for purchase by resident individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions.

Investment Limits

The SGB (Sovereign Gold Bond) scheme has maximum investment limits based on investor categories. 

Individuals and HUFs (Hindu Undivided Families) can invest a maximum of 4 kg of gold per fiscal year (April to March). This investment limit applies cumulatively across different tranches within the same financial year.

For example, an individual can invest 2 kg of gold in April and another 2 kg in May, but the total must not exceed 4 kg in that fiscal year. 

The same limit applies when buying SGBs from the secondary market. If you purchase 1 kg of SGBs in April, you can only buy 3 kg more from the secondary market in the same fiscal year. 

These limits are set by the government to prevent excessive gold investments due to gold’s volatile nature. Before investing in the SGB scheme, assess your financial goals and risk tolerance carefully.