News & Updates

Latest updates on Financial Sector

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What is Goal Based Investing?

GOAL BASEED INVESTMENT –

Usually, all of us individuals save for our financial goals. We set aside a part of our earnings for certain financial goals. But is the saving enough?

For an individual, Financial goals are the personal, and individual should have clear objectives. First, we have set for how we'll save and spend money. We can hope to achieve in the short term or further down the road. Either way, it's often easier to reach our goals if we identify them in advance.

Now Questions are coming in mind, what is long term, what is short term. How we can define it for financial Objectives.

In the context of investment strategy, the Financial Industry Regulatory Authority (FINRA) defines the three types of financial goals as long-term (more than 10 years), mid-term (3 to 10 years) and short-term (less than 3 years).

As per the RBI, the targeted inflation rate in India is set at 4%. It means every year the value of your
Rs. 100 decreases by 4. Rs. 100 today will be worth Rs. 96 a year from now, Rs. 92 two years from
now and so on. Due to inflation our saving, falling in value year after year, eventually making you save more than what you receive in 10 years.
The better route to plan your financial goals is to do it through goal-based financial planning. This
means planning your expenses, saving a certain amount, and investing that amount based on your
financial goals and time horizon.

Suppose you have additional savings of Rs. 10,000 every month that you want to invest to buy a car
worth Rs. 25 lacs within the next 15 years. For this goal, you will have to invest your monthly saving
of Rs. 30,000 at an annualized rate of 13% to reach the investment corpus of Rs. 25 lacs in 13 years.
Not knowing your goal will lead you to not know your return objectives and holding period, which
further leads to poor financial planning.

How is Goal-Based investing different?

When Individual go for investment without GOAL, they choose MUTUAL FUND on the basis of google information only. This might result in you not being able to withdraw your money when you need it because of a shortfall in the portfolio due to losses. The unsatisfied individual then has to delay his goals for some time or take loans to meet the needs.

When it comes to goal-based investing, individual know their investment horizon and the returns
they need to get to achieve the goals, and they need not outperform the market. Goal-based
investing is relatively more stable in providing you returns because you can alter your portfolio if
your goals change. You can go for a more or less risky investment if your risk-taking capacity
changes. If you want to achieve your goals faster than what you wanted earlier, you can invest in a
fund with higher returns, instead of staying committed to one fund.

7 Examples of Personal Finance Goals

  • Start an Emergency Fund. Life is unpredictable, and it's important to be prepared.
  • Pay Off Debt.
  • Save for Retirement.
  • Strive for Homeownership.
  • Pay Off the Car loan
  • Invest in a College Education.
  • Plan for Fun.

How do you set smart financial goals?

  • Make Your Goals Specific. For this you use optymoney calculator.
  • Build Measurable Goals. Measurable goals are easy to track because they're specific to start with.
  • Motivate Yourself with Attainable, Action-Oriented Goals.
  • Keep Your Goals Realistic.

Stay Focused with Timely Goals.

GOAL BASEED INVESTMENT –

Usually, all of us individuals save for our financial goals. We set aside a part of our earnings for certain financial goals. But is the saving enough?

For an individual, Financial goals are the personal, and individual should have clear objectives. First, we have set for how we'll save and spend money. We can hope to achieve in the short term or further down the road. Either way, it's often easier to reach our goals if we identify them in advance.

Now Questions are coming in mind, what is long term, what is short term. How we can define it for financial Objectives.

In the context of investment strategy, the Financial Industry Regulatory Authority (FINRA) defines the three types of financial goals as long-term (more than 10 years), mid-term (3 to 10 years) and short-term (less than 3 years).

As per the RBI, the targeted inflation rate in India is set at 4%. It means every year the value of your
Rs. 100 decreases by 4. Rs. 100 today will be worth Rs. 96 a year from now, Rs. 92 two years from
now and so on. Due to inflation our saving, falling in value year after year, eventually making you save more than what you receive in 10 years.
The better route to plan your financial goals is to do it through goal-based financial planning. This
means planning your expenses, saving a certain amount, and investing that amount based on your
financial goals and time horizon.

Suppose you have additional savings of Rs. 10,000 every month that you want to invest to buy a car
worth Rs. 25 lacs within the next 15 years. For this goal, you will have to invest your monthly saving
of Rs. 30,000 at an annualized rate of 13% to reach the investment corpus of Rs. 25 lacs in 13 years.
Not knowing your goal will lead you to not know your return objectives and holding period, which
further leads to poor financial planning.

How is Goal-Based investing different?

When Individual go for investment without GOAL, they choose MUTUAL FUND on the basis of google information only. This might result in you not being able to withdraw your money when you need it because of a shortfall in the portfolio due to losses. The unsatisfied individual then has to delay his goals for some time or take loans to meet the needs.

When it comes to goal-based investing, individual know their investment horizon and the returns
they need to get to achieve the goals, and they need not outperform the market. Goal-based
investing is relatively more stable in providing you returns because you can alter your portfolio if
your goals change. You can go for a more or less risky investment if your risk-taking capacity
changes. If you want to achieve your goals faster than what you wanted earlier, you can invest in a
fund with higher returns, instead of staying committed to one fund.

7 Examples of Personal Finance Goals

  • Start an Emergency Fund. Life is unpredictable, and it's important to be prepared.
  • Pay Off Debt.
  • Save for Retirement.
  • Strive for Homeownership.
  • Pay Off the Car loan
  • Invest in a College Education.
  • Plan for Fun.

How do you set smart financial goals?

  • Make Your Goals Specific. For this you use optymoney calculator.
  • Build Measurable Goals. Measurable goals are easy to track because they're specific to start with.
  • Motivate Yourself with Attainable, Action-Oriented Goals.
  • Keep Your Goals Realistic.

Stay Focused with Timely Goals.

...
The Biden Impact on Indo US Ties

Joseph Robinette Biden Jr. (78), popularly known as Joe Biden, is a seasoned politician of the US belonging to Democratic Party, who has been sworn in as the 46th President of USA on the 20th January, 2021. He was the 47th Vice-President during 2009-17 when Barrack Obama was the President. Kamala Devi Harris (57), an Indian-African American lineage, is the 49th Vice-President under Joe Biden and is the first female Vice-President of the US.

 

During Obama’s presidentship Indian premier Narendra Modi had excellent comradery with both President Obama and Vice-President Joe Biden. Modi has been continuing good diplomatic relationships with both Republicans and Democrats. 

 

Before dwelling on the impact of Biden’s new regime in the US on Indian economy, let’s briefly look into the US economy and related aspects. Biden took over as President at the peak of COVID-19 pandemic. Naturally therefore, he has to focus on development with the pandemic. As a result, he sooner signed legislation for major pandemic relief. This costs heavily on the treasury. Of course the President has full control over the efforts for COVID-19 vaccination. The price level in the US is sky rocketing with inflation, loss of jobs and productivity and closing down of a few well known malls Bon-Ton, Ames, Waldenbooks, Borders, Wet Seal, Limited Too, JCPenney, Brooks Brothers and similar such large departmental stores and malls. General Motors and other well-known automobile companies are at the verge of bankruptcy. Americans used to low inflation are now beginning to incur higher prices of essential commodities and goods with economic strains coupled with Covid wanes. Interest rates are at the lowest with no earnings on deposits. Government securities market not favorable. The Stock market with star stocks like Apple, Amazon, etc., is the only hope for investors. Government spending on infrastructure, etc., may leave additional burden on tax payers.

 

With this background we may try to positively think about the impact of the new Biden regime in the US on India barring political compulsions on both sides.

 

  1. Only fewer H-1B visas may be denied. This’s important to Indian IT companies and others. H-1B is a non immigrant working visa.
  2. Biden is taking initiative to make available affordable generic drugs that will help Indian pharmaceutical companies.
  3. Biden’s decision to be part of Paris Climate Accord will be beneficial to Indian Automotive industries to use alternative fuels like natural gas and manufacture electric vehicles.
  4. Biden has proposed US $1.9 trillion economic package. Home goods, electronics, automobiles parts and food items may witness a boost in demand. India’s export is likely to be benefited. India has a current account surplus with a few countries - US is one among them. 
  5. Standard & Poor’s 500 Index (S&P 500) gained 13% since the announcement of election of Biden. Wall Street has extended itself to Asian and European markets and India is looking positively to it.

 

Let’s hope the already existing good relationship between the US and India strengthens further under Biden’s regime.

Joseph Robinette Biden Jr. (78), popularly known as Joe Biden, is a seasoned politician of the US belonging to Democratic Party, who has been sworn in as the 46th President of USA on the 20th January, 2021. He was the 47th Vice-President during 2009-17 when Barrack Obama was the President. Kamala Devi Harris (57), an Indian-African American lineage, is the 49th Vice-President under Joe Biden and is the first female Vice-President of the US.

 

During Obama’s presidentship Indian premier Narendra Modi had excellent comradery with both President Obama and Vice-President Joe Biden. Modi has been continuing good diplomatic relationships with both Republicans and Democrats. 

 

Before dwelling on the impact of Biden’s new regime in the US on Indian economy, let’s briefly look into the US economy and related aspects. Biden took over as President at the peak of COVID-19 pandemic. Naturally therefore, he has to focus on development with the pandemic. As a result, he sooner signed legislation for major pandemic relief. This costs heavily on the treasury. Of course the President has full control over the efforts for COVID-19 vaccination. The price level in the US is sky rocketing with inflation, loss of jobs and productivity and closing down of a few well known malls Bon-Ton, Ames, Waldenbooks, Borders, Wet Seal, Limited Too, JCPenney, Brooks Brothers and similar such large departmental stores and malls. General Motors and other well-known automobile companies are at the verge of bankruptcy. Americans used to low inflation are now beginning to incur higher prices of essential commodities and goods with economic strains coupled with Covid wanes. Interest rates are at the lowest with no earnings on deposits. Government securities market not favorable. The Stock market with star stocks like Apple, Amazon, etc., is the only hope for investors. Government spending on infrastructure, etc., may leave additional burden on tax payers.

 

With this background we may try to positively think about the impact of the new Biden regime in the US on India barring political compulsions on both sides.

 

  1. Only fewer H-1B visas may be denied. This’s important to Indian IT companies and others. H-1B is a non immigrant working visa.
  2. Biden is taking initiative to make available affordable generic drugs that will help Indian pharmaceutical companies.
  3. Biden’s decision to be part of Paris Climate Accord will be beneficial to Indian Automotive industries to use alternative fuels like natural gas and manufacture electric vehicles.
  4. Biden has proposed US $1.9 trillion economic package. Home goods, electronics, automobiles parts and food items may witness a boost in demand. India’s export is likely to be benefited. India has a current account surplus with a few countries - US is one among them. 
  5. Standard & Poor’s 500 Index (S&P 500) gained 13% since the announcement of election of Biden. Wall Street has extended itself to Asian and European markets and India is looking positively to it.

 

Let’s hope the already existing good relationship between the US and India strengthens further under Biden’s regime.

...
IPOs. Should you invest?

Looking back to the history of IPO or Initial Public Offer we observe that the very first IPO happened in Netherlands during 1602 of United East India Company shares. It also led to the establishment of the first ever Stock Exchange in Amsterdam.

If an unlisted company issues shares to the public for the first time, it’s called IPO or Initial Public Offer. If a listed company makes fresh issue of shares to the public, it’s called FPO or Follow-On Public Offer. It could also be called NPO or New Public Offer. In India SEBI is the regulatory authority on such issues. A company benefits from IPO by branching out its shares, raising additional funds for further development and growth, enhancing goodwill of the company with the public, enhancing liquidity and accessing capital market.

Since 2000 when the bubble of large number of dot-com entities was burst, the IPOs had got hammered and the number of such issues was dwindling. After the recession of 1970s that showed the merger of both venture capital and IPOs, the IPOs started a big comeback since 1980s. During those days, we may recall the IPOs of Reliance, Infosys and similar companies. During late 70s and early 80s Reliance had a number of equity issues, debenture issues and so on.

Research points out that IPOs not only help overall economic growth and innovation but additional job creation, productivity and standard of living. A sizable number of equities bought during IPOs will lead to enhanced sometimes geometric growth of investment. During early 1990s Infosys was a start-up company by an electric engineer Mr. Narayana Murthy (not well known then) and his friends. Those invested in that company during IPO and/or FPO during early years did reap huge benefits of capital gains.

There are of course certain downsides like volatile market situations, industry getting into competitive pressure from foreign entities establishing in the country, external factors like war, raw material shortages, power shortages, etc. Therefore, investors should also watch and analyze market conditions frequently to cut loss, if any, envisaged. However, the intrinsic value and price should not be lost sight and market fluctuations leading to temporary tumbling of share prices shouldn’t be taken for granted. In a situation like this the investors should keep calm and should not resort to making decisions impulsively and without due consideration.

SEBI guidelines in India seeks to ensure investor protection as well as the safety of the company’s financials. It’s imperative for the companies to follow SEBI guidelines while the prospective shareholders too must do due diligence. In short IPOs and/or FPOs or NPOs are excellent opportunities to a right investor who does his homework well before investing.

A few recently closed IPOs were Yes Bank, Indian Railway Finance Corporation Ltd. Upcoming IPOs are Zomato, NSDL, NCDEX, LIC and Bajaj Energy. Views expressed are of my own as an individual and are not intended to market or suggest any shares. Investors may study well before investing or consult an expert when in doubt.

 

Looking back to the history of IPO or Initial Public Offer we observe that the very first IPO happened in Netherlands during 1602 of United East India Company shares. It also led to the establishment of the first ever Stock Exchange in Amsterdam.

If an unlisted company issues shares to the public for the first time, it’s called IPO or Initial Public Offer. If a listed company makes fresh issue of shares to the public, it’s called FPO or Follow-On Public Offer. It could also be called NPO or New Public Offer. In India SEBI is the regulatory authority on such issues. A company benefits from IPO by branching out its shares, raising additional funds for further development and growth, enhancing goodwill of the company with the public, enhancing liquidity and accessing capital market.

Since 2000 when the bubble of large number of dot-com entities was burst, the IPOs had got hammered and the number of such issues was dwindling. After the recession of 1970s that showed the merger of both venture capital and IPOs, the IPOs started a big comeback since 1980s. During those days, we may recall the IPOs of Reliance, Infosys and similar companies. During late 70s and early 80s Reliance had a number of equity issues, debenture issues and so on.

Research points out that IPOs not only help overall economic growth and innovation but additional job creation, productivity and standard of living. A sizable number of equities bought during IPOs will lead to enhanced sometimes geometric growth of investment. During early 1990s Infosys was a start-up company by an electric engineer Mr. Narayana Murthy (not well known then) and his friends. Those invested in that company during IPO and/or FPO during early years did reap huge benefits of capital gains.

There are of course certain downsides like volatile market situations, industry getting into competitive pressure from foreign entities establishing in the country, external factors like war, raw material shortages, power shortages, etc. Therefore, investors should also watch and analyze market conditions frequently to cut loss, if any, envisaged. However, the intrinsic value and price should not be lost sight and market fluctuations leading to temporary tumbling of share prices shouldn’t be taken for granted. In a situation like this the investors should keep calm and should not resort to making decisions impulsively and without due consideration.

SEBI guidelines in India seeks to ensure investor protection as well as the safety of the company’s financials. It’s imperative for the companies to follow SEBI guidelines while the prospective shareholders too must do due diligence. In short IPOs and/or FPOs or NPOs are excellent opportunities to a right investor who does his homework well before investing.

A few recently closed IPOs were Yes Bank, Indian Railway Finance Corporation Ltd. Upcoming IPOs are Zomato, NSDL, NCDEX, LIC and Bajaj Energy. Views expressed are of my own as an individual and are not intended to market or suggest any shares. Investors may study well before investing or consult an expert when in doubt.

 

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Woman: A Gorgeous Investor

One of the issues underlying empowerment is often money. However there is more to this, even when women earn well, they are still not very likely to be managing their money, savings, and investments

Men are usually the ones who ask for investment advice for their family or on behalf of the women in their life. But what is the reason for this?

From research, it can be noted that the reason is self confidence. Women tend to second guess their questions and often assume they are asking stupid questions, whereas men ask anything and learn from the advice given, regardless of their lack of knowledge.

There is a stereotype that men save money and women spend money

Even TV ads tend to depict this; the woman is portrayed as a smart decision maker only in ads that have to do with household appliances or other consumer goods. When the ads are for financial products, it is always the man who plans for the future while the woman is buying the household appliance.

Why are women shy about investing? The reasons are rooted in societal norms. Women were meant to be nurturers while men were providers. In India, when a woman earns, her income is meant to be for household purchases while the man’s income is mean to be for investment purposes.

The men in the family are usually not very informative when it comes to investments. Women also don’t want to ask so as not to infuriate. It is generally not a widely discussed topic amongst most families. Women are also risk averse and prefer to play it safe.

So, how do we make women less fearful about the idea of investing? Raise awareness

Women need to be made aware that they possess certain traits that are beneficial to investing; women are less impulsive and are able to reflect, women are also better at coming to terms with their mistakes and learning from them.
It is important to remember that at some point in a woman’s life, she will need to take responsibility for her or her family’s finances. Divorce or death makes it important for women to take full responsibility of their children or elderly parents whether the woman is earning or not. At such times, it is prudent that women are aware of the options available to them. About 90% of women will be financially responsibility for their families at some point in their life (Wi$eUp). More women are breadwinners for their families (30%) (Wi$eUp).

Women typically outlive men and need to be prepared financially for a longer future after retirement. Some women breadwinners in the family need to have goal based investments, as well as health insurance plans for themselves and all dependents/family. Pension plans are important to continue receiving a steady income after retirement It is extremely important for every woman to keep money in the bank to cover at least three to six months into the future. Dependent women need to be as involved in financial decision making of the family as they are in running the house. Most housewives tend to be frugal anyways, and always end up spending less money than allotted for various house expenses. It would be extremely beneficial for them to start an SIP even if they aren’t earning.

One of the issues underlying empowerment is often money. However there is more to this, even when women earn well, they are still not very likely to be managing their money, savings, and investments

Men are usually the ones who ask for investment advice for their family or on behalf of the women in their life. But what is the reason for this?

From research, it can be noted that the reason is self confidence. Women tend to second guess their questions and often assume they are asking stupid questions, whereas men ask anything and learn from the advice given, regardless of their lack of knowledge.

There is a stereotype that men save money and women spend money

Even TV ads tend to depict this; the woman is portrayed as a smart decision maker only in ads that have to do with household appliances or other consumer goods. When the ads are for financial products, it is always the man who plans for the future while the woman is buying the household appliance.

Why are women shy about investing? The reasons are rooted in societal norms. Women were meant to be nurturers while men were providers. In India, when a woman earns, her income is meant to be for household purchases while the man’s income is mean to be for investment purposes.

The men in the family are usually not very informative when it comes to investments. Women also don’t want to ask so as not to infuriate. It is generally not a widely discussed topic amongst most families. Women are also risk averse and prefer to play it safe.

So, how do we make women less fearful about the idea of investing? Raise awareness

Women need to be made aware that they possess certain traits that are beneficial to investing; women are less impulsive and are able to reflect, women are also better at coming to terms with their mistakes and learning from them.
It is important to remember that at some point in a woman’s life, she will need to take responsibility for her or her family’s finances. Divorce or death makes it important for women to take full responsibility of their children or elderly parents whether the woman is earning or not. At such times, it is prudent that women are aware of the options available to them. About 90% of women will be financially responsibility for their families at some point in their life (Wi$eUp). More women are breadwinners for their families (30%) (Wi$eUp).

Women typically outlive men and need to be prepared financially for a longer future after retirement. Some women breadwinners in the family need to have goal based investments, as well as health insurance plans for themselves and all dependents/family. Pension plans are important to continue receiving a steady income after retirement It is extremely important for every woman to keep money in the bank to cover at least three to six months into the future. Dependent women need to be as involved in financial decision making of the family as they are in running the house. Most housewives tend to be frugal anyways, and always end up spending less money than allotted for various house expenses. It would be extremely beneficial for them to start an SIP even if they aren’t earning.

...
Sovereign Gold Bond (SGB) scheme 2020-21cheme

The Sovereign Gold Bond Scheme will be free for subscription starting from 01 March to 05 March 2021 with an issue price fixed at a nominal value of Rs.4,662 per gram of Gold to which the last date of settlement will be 09th March 2021 as per a statement issued by the Reserve Bank of India on 26th February 2021.

What and Why of Sovereign Gold Bond Scheme?

Sovereign Gold Bond Scheme initially was introduced by the Government of India way back in November 2015, with an intent to reduce the requirement of physical Gold in the domestic market by individual stock holders. It was an effort made by the Government at the Centre on behalf of Reserve Bank of India to transform household savings in the form of gold into financial savings. Gold Bonds are excellent substitutes for converting physical Gold holdings into Financial savings, 10 such tranches of Sovereign Gold Bonds (SGB) have already been launched by the RBI during the year 2019-2020 aggregating nearly 6.13 tonnes of gold, valuing at Rs.2113.46 crores.

How are they priced?

The issue price of SGB is set in Indian Rupees and is calculated on the basis of simple average of Closing Price* of Gold for the last 3 working days of the week prior to the Subscription Time i.e. Feb 24, 25, 26, 2021. The nominal Bond value is denominated in multiples of Gold grams, the price for series XII is Rs.4662 per gram of Gold.

Further, the Government in consultation with RBI declared that these Gold Bonds will be available at a discounted price, for the subscribers who apply for the Bond online and make digital payments at a Rs.50 per gram lesser rate. This implies that cost for online bookings and digital transfer of payments will be Rs.4,612 only for each gram of Gold.

*Price published by the India Bullion and Jeweller Association Limited (IBJA) for 999 purity of Gold is considered standard.

Minimum and maximum limits for investments:

The permissible investment limit for the SGB starts from a minimum of 1 gram Gold to a maximum limit of 4 KG for an individual investor. This limit shall hold good for a HUF nominee as well but entities like trusts and other similar bodies may subscribe up to a maximum of 20 KG for each fiscal year starting from April to March.

Key Features:

  • Indian residents including individuals, HUF’s, Trusts, Universities, Charitable Institutions and investment on behalf of a minor can be made on SGB’s.
  • Total maturity period of each bond is eight years, however an option to exit bonds can be exercised from fifth year onwards, only on interest pay out dates.
  • Latest SGB interest rate is 2.50% p.a., they are linked with the current market price of Gold and are paid bi-yearly on their nominal value.
  • As per GS Act 2006 only Government of India can issue Gold Bonds on behalf of RBI. A Holding Certificate is issued to each stock holder which can eventually be converted into a Demat Form for further trading.
  • Similar KYC norms (Know Your Customer) are followed which apply at the time of buying physical Gold, thus a copy of Driving Licence, Voter ID, Passport or a PAN Card is required.
  • Interests earned on SGB are taxable as per the norms on IT Act 1961. Although an individual is exempted from the capital gains arising out of redemption of SBG, to add to this on transfer of Bonds from an individual to another, benefit of indexation is provided on the Long Term Capital Gains.
  • The price of redemption is in Rupees, calculated on the basis of average closing price of 999 purity of Gold of previous three business days.
  • These Bonds are good to be acquired by the banks for calculating the Statutory Liquidity Ratio during the process of hypothecation, raising lien or pledging.
  • SGB’s are available in banks, selected post offices, Stock Holding Corporation of India Limited (SHCIL) and also traded at the National Stock Exchange and Bombay Stock Exchange through intermediaries.
  • For the trading of the Bond, the receiving officer may levy a maximum of 1% of the total subscription amount as commission, half of this amount is shared with the brokers or agents.

On the whole, SGB is ideal for investors with low appetite of risk taking, they have an added advantage of Indexation, provide income in the form of interests, can be used as a collateral security at the time of need and can be effortlessly traded.

The Sovereign Gold Bond Scheme will be free for subscription starting from 01 March to 05 March 2021 with an issue price fixed at a nominal value of Rs.4,662 per gram of Gold to which the last date of settlement will be 09th March 2021 as per a statement issued by the Reserve Bank of India on 26th February 2021.

What and Why of Sovereign Gold Bond Scheme?

Sovereign Gold Bond Scheme initially was introduced by the Government of India way back in November 2015, with an intent to reduce the requirement of physical Gold in the domestic market by individual stock holders. It was an effort made by the Government at the Centre on behalf of Reserve Bank of India to transform household savings in the form of gold into financial savings. Gold Bonds are excellent substitutes for converting physical Gold holdings into Financial savings, 10 such tranches of Sovereign Gold Bonds (SGB) have already been launched by the RBI during the year 2019-2020 aggregating nearly 6.13 tonnes of gold, valuing at Rs.2113.46 crores.

How are they priced?

The issue price of SGB is set in Indian Rupees and is calculated on the basis of simple average of Closing Price* of Gold for the last 3 working days of the week prior to the Subscription Time i.e. Feb 24, 25, 26, 2021. The nominal Bond value is denominated in multiples of Gold grams, the price for series XII is Rs.4662 per gram of Gold.

Further, the Government in consultation with RBI declared that these Gold Bonds will be available at a discounted price, for the subscribers who apply for the Bond online and make digital payments at a Rs.50 per gram lesser rate. This implies that cost for online bookings and digital transfer of payments will be Rs.4,612 only for each gram of Gold.

*Price published by the India Bullion and Jeweller Association Limited (IBJA) for 999 purity of Gold is considered standard.

Minimum and maximum limits for investments:

The permissible investment limit for the SGB starts from a minimum of 1 gram Gold to a maximum limit of 4 KG for an individual investor. This limit shall hold good for a HUF nominee as well but entities like trusts and other similar bodies may subscribe up to a maximum of 20 KG for each fiscal year starting from April to March.

Key Features:

  • Indian residents including individuals, HUF’s, Trusts, Universities, Charitable Institutions and investment on behalf of a minor can be made on SGB’s.
  • Total maturity period of each bond is eight years, however an option to exit bonds can be exercised from fifth year onwards, only on interest pay out dates.
  • Latest SGB interest rate is 2.50% p.a., they are linked with the current market price of Gold and are paid bi-yearly on their nominal value.
  • As per GS Act 2006 only Government of India can issue Gold Bonds on behalf of RBI. A Holding Certificate is issued to each stock holder which can eventually be converted into a Demat Form for further trading.
  • Similar KYC norms (Know Your Customer) are followed which apply at the time of buying physical Gold, thus a copy of Driving Licence, Voter ID, Passport or a PAN Card is required.
  • Interests earned on SGB are taxable as per the norms on IT Act 1961. Although an individual is exempted from the capital gains arising out of redemption of SBG, to add to this on transfer of Bonds from an individual to another, benefit of indexation is provided on the Long Term Capital Gains.
  • The price of redemption is in Rupees, calculated on the basis of average closing price of 999 purity of Gold of previous three business days.
  • These Bonds are good to be acquired by the banks for calculating the Statutory Liquidity Ratio during the process of hypothecation, raising lien or pledging.
  • SGB’s are available in banks, selected post offices, Stock Holding Corporation of India Limited (SHCIL) and also traded at the National Stock Exchange and Bombay Stock Exchange through intermediaries.
  • For the trading of the Bond, the receiving officer may levy a maximum of 1% of the total subscription amount as commission, half of this amount is shared with the brokers or agents.

On the whole, SGB is ideal for investors with low appetite of risk taking, they have an added advantage of Indexation, provide income in the form of interests, can be used as a collateral security at the time of need and can be effortlessly traded.