Sovereign Gold Bonds: Missed SGB tranche IV deadline? Here is how you may buy SGBs from exchanges at lower rate

Sovereign Gold Bonds: Sovereign Gold Bonds (SGBs) are issued in limited periods through the year, which may lead to investors missing out on the opportunity to invest in the Reserve Bank of India's (RBI) SGB tranche. 

In such a case, investors must note that apart from buying SGBs directly from the RBI through its primary issuance, one can buy SGBs from the bourses such as National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) using demat and trading account.  

Buying SGBs from the secondary market does offer an added advantage as there is a possibility that SGBs trade at a discount to the spot price of gold on exchanges.

Also read- Sovereign Gold Bond calculator: How SGB interest rate is calculated?

SGB tranche IV which had a subscription window open from March 6- March 10 had an issue price fixed at Rs 5,611 per gram of gold or per unit. The government even offered a discount of Rs 50 per gram to those applying online and making payments through digital mode.

However, one may avail SGBs at a discounted rate on the exchanges. The price of SGBs on the exchanges is a result of supply and demand. Since usually there isn’t a lot of liquidity for these securities on the exchanges, the gold prices diverge from the gold spot prices. Here, investors hold SGBs in demat form only.

Also read- Sovereign Gold Bond scheme 2023: 10 reasons to subscribe govt-backed digital gold scheme

Investors who wish to make an early exit should always closely monitor trading volumes, trading prices, and actual gold prices when making a decision.

Sovereign Gold Bonds: Interest

One receives a guaranteed 2.5 interest rate per annum on SGB, payable semi-annually on the nominal value. It has tax-free redemption once the investor completes the maturity period. The tenure of the bond is 8 years, with an exit option in the 5th, 6th and 7th year, to be exercised on the interest payment dates.

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SGBs bonds are denoted by '999' purity. When you buy Sovereign Gold Bonds, they are free from issues like purity, making charges and others. These bonds are considered to be an alternative to physical gold and have no impurity.

Sovereign Gold Bonds are eligible to be used as collateral for loans. The Loan to Value ratio is the same as applicable to ordinary gold loans prescribed by RBI from time to time. However, sanctioning loans against SGBs is subject to the decision of the financial institutions. It cannot be inferred as a matter of right.

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