How to Invest in Gold without Physical Holding – Part II

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Last updated on May 16th, 2021 at 05:49 pm

Invest in Gold without Physical Holding – Find out How?-Part II

After knowing the Basics of Sovereign Gold Bond; in this article, we would discuss the redemption and other important investor concerns about the Sovereign Gold Bond.

How Sovereign Gold Bonds are redeemed?

SGBs would be redeemed on maturity at cash and the redemption price is based on a simple average of the closing price of gold (999 purity) of the previous 3 business days from the date of repayment.

Following steps are to be followed during the redemption

  • The investor would be intimated one month before maturity regarding the maturity of the bond.
  • On the date of maturity, the maturity proceeds will be credited to the bank account as per the details on record.
  • In case there are changes in any details, such as, account number, email ids, then the investor must intimate the bank/SHCIL/PO promptly. Invest in Gold without Physical Holding – Find out How?-Part II

Is premature redemption allowed?

The tenor of the bond is 8 years but early encashment/redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges if held in Demat form. It can also be transferred to any other eligible investor. In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent thirty days before the coupon payment date. Request for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer’s bank account provided at the time of applying for the bond.

Can Sovereign Gold Bonds traded?

SGB can be traded in the secondary market after 14 days from the subscription date subject to a notice published by RBI (pls note that bonds should be in Demat form to be tradable).

Can the bonds be gifted to a relative or friend on some occasion?

The bond can be gifted/transferable to a relative/friend/anybody who fulfills the eligibility criteria. The Bonds shall be transferable in accordance with the provisions of the Government Securities Act 2006 and the Government Securities Regulations 2007 before maturity by the execution of an instrument of transfer that is available with the issuing agents.

Can one use these securities as collateral for loans?

Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions, and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loans prescribed by RBI from time to time. Granting a loan against SGBs would be subject to the decision of the bank/financing agency, and cannot be inferred as a matter of right.

Who will provide other customer services to the investors after the issuance of the bonds?

The issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents through which these securities have been purchased will provide other customer services such as change of address, early redemption, nomination, grievance redressal, transfer applications, etc.

Is there a nomination facility available for these investments?

Yes, nomination facility is available as per the provisions of the Government Securities Act 2006 and Government Securities Regulations, 2007. A nomination form is available along with an application form. An individual Non – resident Indian may get the security transferred in his name on account of his being a nominee of a deceased investor provided that: Invest in Gold without Physical Holding – Find out How?-Part II

  1. the Non-Resident investor shall need to hold the security till early redemption or till maturity; and
  2. The interest and maturity proceeds of the investment shall not be repatriable.

What is the procedure to be followed in case of any contingency?

The nominee/nominees to the bond may approach the respective Receiving Office with their claim. The claim of the nominee/nominees will be recognized in terms of the provision of the Government Securities Act, 2006 read with Chapter III of Government Securities Regulation, 2007.

Dedicated e-mail facility for any queries regarding Sovereign Gold Bond

A dedicated email has been created by the Reserve Bank of India to receive queries from members of the public on Sovereign Gold Bonds. Investors can mail their queries to this email id 


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CA Priyanka Choudhary Jain


Disclaimer: The above content is for general info purpose only and does not constitute professional advice. The author/ website will not be liable for any inaccurate / incomplete information and any reliance you place on the content is strictly at your risk.

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