Features of the Sovereign Gold Bond Scheme that Investors Should Know...

Source : RBI

Interest Rate:

Investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value. 

Collateral:
Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank of India (RBI) from time to time.

Issue price:
The bond price will be fixed in Indian rupees on the basis of the simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association for the week (Monday to Friday) preceding the subscription period. The issue price of the gold bonds will be Rs 50 per gram less than the nominal value. 

Eligibility:
Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts, universities and charitable institutions. Bonds will be denominated in multiples of grams of gold with a basic unit of 1 gram. 

Tenure:
The tenure of the bond will be for a period of eight years with exit option from fifth year to be exercised on the interest payment dates. 

Minimum and maximum size:
The minimum permissible investment will be 1 grams of gold.
The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained. 

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. 

Issuance form:
Gold bonds will be issued as the Government of India stocks under the GS Act, 2006. Investors will be issued a holding certificate for the same. Bonds are eligible for conversion into demat form. 

Redemption price:
The redemption price will be in Indian rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA. 

Sales channel:

Bonds will be sold through banks, Stock Holding Corporation of India (SHCIL), designated post offices as may be notified and recognised stock exchanges viz., National Stock Exchange of India and Bombay Stock Exchange, either directly or through agents.