The Reserve Bank Of India, on behalf of the government Of India, introduced the sovereign gold bond scheme in the year 2015 as an alternative option to gold loans. Both gold loans and the sovereign gold bond scheme is presented by all banks and Non-Banking Financial Companies(NBFCs). In this scheme, a secured bond is held by the bank or NBFC against the physical gold holdings of the government. The bond in this scheme is denominated by multiple grams of gold with a basic unit of 1gm and is available in both paper and Demat format. The bond paper can be used as an asset to avail secured loans from the banks and NBFCs. It is considered as a liquid asset like physical gold and serves fervently at times of financial need and want. The gold quantity the investor pays is protected as they will receive an ongoing market price at the time of maturity of the sovereign gold loan scheme. The term or tenure of the gold bond scheme is a fixed eight years with an exit option after the 5th year. The interest rate of the scheme is fixed and is 2.5% per annum, whereas the gold loan interest rate starts at 7% per annum. The sovereign gold bond scheme is also free of many charges that are usually procured in gold loans. The subscription limit of an individual is a maximum of 4 kg, and 20 kgs for trustees, universities, etc., The maximum limit for Hindu undivided Families (HUF) is also 4kg. The bank or financial company issues a holding certificate as proof of your bond subscription. In this modern world, with the help of the internet and an electronic gadget, the bond can be applied and acquired in online mode. The conventional offline mode is also available and is as flexible as the online mode. The payment in online mode can only be done via netbanking. The redemption at the end of the bond’s tenure is done only in Indian National Rupees(INR), and the price will be based on the average rate of 99.9 purity of the last three days before the return of the repayment. And on opting for an online mode, the nominal value will be Rs 50 per gram less than opting for offline mode. The following are the eligible candidates to opt for this sovereign gold loan scheme: Individuals, separate or co-applicant (joint application), Hindu Undivided Family ( generations of families living under the same household, pooling in assets from various individuals to apply for tax reduction), trustees, universities, charitable institutions and minors with a guardian signing off on the application. If the applicant produces a government authorised proof of identification( Aadhar card, Voter ID, passport, driving license, PAN card, etc..) and a filled application form, the bank or financial company allots the applicant a bond. The bond can also be transferred or sold to an applicant that meets the required eligibility criteria and has the necessary documents. However, the sovereign gold bond can only be transferred before the maturity date, and both the applicants have to meet the bank in person. The issue price of the gold will stay the same throughout the tenure. The interest rate on the sovereign gold bond is taxable according to the Income Tax Act, 1961 (43 of 1961), and on redemption, the capital gains of the investor are returned. The benefit of indexation will be provided to a long term capital or at the transfer of the bond from one investor to another. A nominee facility is available in the sovereign gold bond scheme. The tranche dates of the scheme in the 2021-2022 series are August 30 – September 03, 2021, for the date of subscription and the date of issuance, September 7 2021. SBI provides gold loans and sovereign gold loan schemes in addition to its innumerable commercial services. The SBI gold loan interest rate starts at 7.30% per annum with a maximum tenure of 36 months. The sovereign gold loan scheme in SBI is highly acclaimed.
