The Bond is issued by Reserve Bank on behalf of the Government of India and they are tradable on Stock exchange.
Tenure SGBs have a maturity period of 8 years. However, the investor can exit the bond from the 5th year(only on the date of interest payout).
Sovereign Gold Bonds don’t pose any risks that are related to physical gold, except the market risks. There are no such heavy designing charges levied therein. Furthermore, the interest can be earned on sovereign gold bonds, unlike physical gold which usually lies as an idle investment.
You can earn an assured annual interest at the rate of 2.50% on the issue price which determines the latest fixed rate.
Long-term capital gains accrue when investors transfer bonds which are eligible for indexation benefits. There is also a sovereign guarantee on the principal along with the earned interest
Sovereign gold bonds are accepted by some banks as a means of collateral security against loans pledged in Demat form. However, it will have a preference like a gold loan after adjusting the loan-to-value(LTV) ratio to the value of gold. The India Bullion and Jewellers Association Limited ascertain this.
Sovereign gold bonds are traded on stock exchanges within a specified date and that is done as per the discretion of the issuer. For example, after 5 years of completion, SGBs can be traded on BSE or NSE, like others.
SGBs are preferred by low-risk taking investors who want to diversify their portfolio with at least 5-10% in gold.
The buying and selling expenses in the SGB is also nominal as compared to the physical gold.
Those investors who do not want to go through the fuss of storing physical gold can also choose SGBs. Simply because, it is easier to store in the Demat form, and it cannot be stolen as they are held in electronic form.
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