What is the Sovereign Gold Bond Scheme ?

The Sovereign Gold Bond (SGB) programme was introduced in November 2015 with the aim of lowering the demand for physical gold and converting a portion of domestic savings which were previously used to buy gold into financial savings. The Bonds have a 2.50 percent (fixed rate) interest rate on the amount of the initial investment.

The investor's bank account will get interest credits twice a year, and the last interest payment will be due at maturity along with the principal. As a result of the volatility in the equity markets, investment in SGBs increased significantly during Covid-affected years, with 2020–2021 and 2021–2022 accounting for roughly 75% of all sales of the bonds since the scheme's start in November 2015.


What is the Sovereign Gold Bond Scheme ?

What is the Sovereign Gold Bond Scheme ?

Also Read: National Beekeeping & Honey Mission (NBHM) | UPSC IAS IPS IFS

In accordance with the Government Securities (GS) Act of 2006, the Gold Bonds are issued as Government of India Stock. On behalf of the Indian government, these are issued by the Reserve Bank of India (RBI). Bonds are offered via approved post offices, commercial banks, the Stock Holding Corporation of India Limited (SHCIL), and recognised stock exchanges such as the Bombay Stock Exchange and the National Stock Exchange of India Limited, either directly or through agents. The bonds may only be purchased by residents, Hindu Undivided Families (HUFs), trusts, academic institutions, and non-profit organisations.


Sovereign Gold Bond Scheme 2022-23

Series I and II of the Sovereign Gold Bond Scheme 2022-23 has been declared by the Indian government in Notification No. F.No4.(6)-B (W&M)/2022, dated June 15, 2022. Each tranche under the Scheme was divided into separate series (Series I and II). The aforementioned announcement shall govern the terms and circumstances surrounding the issuing of the Bonds. According to Notification No. 4(6)-B(W&M)/2022 issued by the Government of India on June 15, 2022, subscriptions for the Sovereign Gold Bonds 2022-23 (Series I) would be accepted from June 20 through June 24, 2022, with the settlement date set for June 28, 2022.

According to a press release from the RBI dated June 17, 2022, the issuance price of the Bond during the subscription period will be Rs 5,091 (Rupees five thousand ninety-one only) per gram. The Bonds will be sold through designated post offices, designated stock exchanges, such as the National Stock Exchange of India Limited and Bombay Stock Exchange Limited, Scheduled Commercial banks (aside from Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), and Clearing Corporation of India Limited (CCIL).


Few Important Facts

Sl. No. Item Details
1 Product name Sovereign Gold Bond 2022-23
2 Issuance To be issued by Reserve Bank India on behalf of the Government of India.
3 Eligibility The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.
4 Denomination The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
5 Tenor The bond will have an 8-year tenor, with an exit option after the fifth year that can be utilized on interest payment dates.
6 Minimum size One gram of gold will be the smallest investment that is allowed.
7 Maximum limit The maximum amount that may be subscribed is 4 KG for individuals, 4 KG for HUF, and 20 KG for trusts and other similar entities every fiscal (April-March), as may be periodically announced by the Government. We'll get a self-declaration to that effect. The annual ceiling will encompass both secondary market purchases and bonds that were purchased at the government's initial issuance in various tranches.
8 Joint holder In the case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.
9 Issue price The issuance price of the Bond during the subscription period shall be Rs. 5,091 (Rupees Five Thousand Only) per gram. The price of the bond is set in Indian rupees using the simple average of the closing price of 999-purity gold for the final three working days of the week before to the subscription period, as announced by the India Bullion and Jewellers Association Limited. For individuals who subscribe online and pay with a digital payment method, the issue price of the Gold Bonds would be Rs 50 less per gram.
10 Payment option 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.
11 Issuance form The Gold Bonds will be issued as Government of India Stocks under the GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into Demat form.
12 Redemption price The redemption price will be in Indian Rupees based on the simple average of the closing price of gold of 999 purity of the previous 3 working days published by IBJA.
13 Sales channel Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices as may be notified and recognized stock exchanges viz., National Stock Exchange of India Ltd and Bombay Stock Exchange Ltd, either directly or through agents.
14 Interest rate The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
15 Collateral Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to the ordinary gold loan mandated by the Reserve Bank from time to time.
16 KYC Documentation The same Know-Your-Customer (KYC) standards will apply to the purchase of actual gold. A voter ID card, an Aadhaar card, a PAN card, a TAN card, or a passport are examples of KYC papers. Every application must be supported with the investor's "PAN Number," which was provided by the Income Tax Department (s).
17 Tax treatment According to the provisions of the Income Tax Act of 1961, the interest on Gold Bonds will be taxed (43 of 1961). The capital gains tax that would have been due upon repurchasing SGB by an individual has been waived. Any person who receives long-term capital gains through the transfer of a bond will be eligible for indexation benefits.
18 Tradability Within a fortnight of the issuance, bonds will be tradable on stock markets on a date that the RBI will announce.
19 SLR eligibility Bonds acquired by the banks through the process of invoking lien/hypothecation/pledge alone shall be counted towards the Statutory Liquidity Ratio.
20 Commission The receiving offices must split at least half of the commission they get with the agents or subagents for the business they secured via them. Commission for the distribution of the bond must be given at the rate of 1% of the total subscription received by the receiving offices.



  • The Sovereign Gold Bonds will be offered in paper and Demat formats.
  • The bond has a tenor of at least 8 years, with an option to terminate after 5 years.
  • Both the capital invested and the interest will be covered by sovereign guarantees.
  • Bonds can be used as loan collateral.
  • Bonds would be permitted to be exchanged on exchanges, allowing investors who may want to sell their bonds early to do so. The capital gain tax resulting from the redemption of SGB to an individual would also be free.


Difference between Gold ETF, Sovereign Gold Bond & Physical Gold

Points Physical Gold Gold ETF Sovereign Gold Bond
Returns Lower than actual return on gold Lower than actual return on gold Higher than the actual return on gold
Safety Risk of handling physical gold High High
Purity of Gold The purity of Gold always remains a question High as it is in Electronic Form High as it is in Electronic Form
Capital Gain Long-term capital gain applicable after 3 years Long-term capital gain applicable after 3 years Long-term capital gain is applicable after 3 years. ( No Capital gain tax if held till maturity )
Collateral against Loan Yes No Yes
Tradability / Exit Route Conditional Tradable on Exchange Tradable on Exchange. Redemption- 5th year onwards with GoI
Storage Cost High Very Low Very Low



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 of the scheme from time to time. The rate of SGB will be declared by RBI before every new tranche by issuing a Press Release. This scheme is one of the safest investment options available in the market.

We have discussed the benefit of the scheme above but there are a few disadvantages as well. In contrast to real gold, which can be sold right away, this is an investment for the long term. Additionally, although government gold bonds are listed on an exchange with low trading volumes, it will be challenging to sell them before maturity.

Leave a Comment