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What is Sovereign Gold Bond? How do you invest in SGB?

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Last Updated on 05/04/2022 by Deepak Singla

Gold investments have been more than investments in India – it has been more like a tradition that has been followed for years and years. Even after all of these decades, investing in gold has not at all gotten old, and moreover, the value of gold is skyrocketing as always. Just how our investment pathways have evolved, so has to invest in gold bonds. We don’t just invest in physical goods anymore, do we? We invest in its evolutionary forms.

Our gold investments are no more walking into a store and picking out jewellery – it has gone far beyond that – don’t you think? We have begun to invest in digital gold, sovereign gold bonds, and so much more. So, let us move forward to know about these Sovereign Gold Bonds, shall we?

Let us talk about everything you need to know about Sovereign Gold Bonds and get started with your investment. The very first thing is – what is a sovereign gold bond?

What is a Sovereign Gold Bond?

Sovereign Gold Bonds are issued by the RBI on behalf of the Government of India. It is sold per unit basis, and every unit derives the value from underlying one gram gold. The cost is measured by taking an average of closing prices published by the India Bullion and Jewellers Association Limited.

Sovereign Gold Bonds are simple to buy and handle and are paid half-yearly. An individual is restricted to only buying a maximum of 4kgs of gold in a year, and if it is trusted – it is limited to 20kgs per year.

You only need a PAN card to buy an SGB, and also – without that, you wouldn’t be able to buy Sovereign Gold Bonds.

Investing in a gold bond is not as hard as it seems to be. There are simpler and better ways to do it. This article has you covered the whole concept, and you will not miss out on anything when it comes to investment in sovereign gold bonds. So, don’t worry about all of those questions popping in your head, you will find the answers to them right here.

How do Sovereign Gold Bonds Work?

Have you ever thought, “what is in it for me if I invest in SGBs?” There actually is a lot – know more as you read on.

The Benefits for you in SGBs

  • Throughout the fiscal year, the RBI issues SGBs in several tranches. These securities can be obtained through banks, brokers, post offices, and online platforms. To encourage investors to acquire SGBs online, a discount of Rs. 50 per gram is granted to those who do so digitally.
  • It is worth noting that the RBI releases new series of SGBs into the market throughout the year. So, if you missed the last one announced, you can always wait for the next one.
  • Bonds can be purchased in physical, digital, or dematerialized form.
  • After purchasing these bonds in person, investors can have them credited to their Demat accounts by making a special request. The RBI then handles the dematerialization at their end and determines how long the bonds will be stored in the RBI’s books.
  • Dematerialization is also possible after allotment. Investors who do not wish to purchase directly from the RBI can do so through the secondary market, which includes stock exchanges.

Though there is all of this tied to an SGB – there are some risks that you can never overlook.

Read More: Best Places to Buy cheapest gold in the world

Risks of SGBs

If the market price of gold goes below its cost price, there is a danger of loss. This is not a danger unique to the SGB form of gold investing, but it is applicable to all forms of investment.

The RBI, on the other hand, guarantees that the investor will never lose the amount of gold granted to them.

So, you have to remember – it is a by-product of almost all of the investments, and SGBs are one of them too.

So, you’ve seen the pros and also the cons of investing in SGBs. If you think you can afford to invest in them, there is a little more you might want to look at.

Things you Need to Know

– Any Indian resident can apply and invest in SGBs, and you can also invest on behalf of a minor.

– The value of the bond is assessed in multiple grams of gold where the basic unit is 1 gram. The minimum initial investment is in a gram of gold, and the upper limit is 4kgs for an individual investor and 20kgs for an organization.

– The tenure of the SGB is for 8 years, and you can choose to leave the bond from the 5th year onwards.

– The current rate of interest for the scheme is 2.5% for a year.

– Ony RBI can issue SGBs, and they are traded on SEBI.

– You also need your documents handy before you can open the scheme.

If you can comply with all of this, then you are ready for an SGB!

Check Here: 6 Errors with Gold Investments and How to Avoid Them


There are several advantages to investing in an SGB, as you can see, but make sure you have your documents in hand to get started. Also, you need to get an overview of the risks involved in the scheme, to make sure you know where you are headed.