How to invest in Sovereign Gold Bonds
After researching about Investing in Gold and various ways to invest in gold. I realized that investing in Sovereign Gold Bond is the best option for me as it sits well with my requirements and expectations. So, in this story, I will be sharing steps on how I invested in Sovereign Gold Bonds.
But first, if you want to know why I think investing in Gold is good and why Sovereign Gold Bonds is the most optimal form of Gold Investments for me, you can check these stories. 👇
Now, coming to how to invest in a Sovereign Gold Bond.
Sovereign Gold Bonds are issued by RBI and in around 12 series every year. So, that means these are not available always, however it can be exchanged on the Stock Market and I will come to that point later in this story but first, let me share how to get a fresh issue of these SGB from RBI.
There are 3 more Series coming for Subscription and the dates are as follows. There is a window of 5 days within which the Subscription can be done.👇
This data is from RBI’s press release, issued on Oct,09,2020. You can check this release here.
The price of gold for a Tranche is fixed and shared by RBI before the opening of that Series. Generally, it is the average closing price of gold, shared by India Bullion and Jewellers Association Limited for the previous 3 working days before the start of the subscription date. Also, currently, RBI is offering a discount of ₹50 on the face value of gold per gram.
This subscription can be purchased from various scheduled commercial banks some of which are as follows:
- State Bank of India,
- ICICI Bank,
- HDFC Bank,
- Axis Bank,
- Bank of Baroda,
- and many more.
The complete list can be found at RBI’s website, which I have linked here for easy access.
Apart from these scheduled commercial banks, the subscription can be purchased from various Post offices and even the Stock Market (National Stock Exchange and Bombay Stock Exchange, more on that later). Most of these banks have a facility to apply for the subscription online, even from their mobile application at just the tap of a button. However, I generally prefer to use the Website instead of the Mobile app, so I make my purchase from my Bank’s Website.
Here, Banks give the option to add the DP ID and Client ID which is used if the Bonds are needed in a DEMAT form. However, I am currently exploring that option and deciding whether it is useful for me or not, so I will keep these fields empty and get it in the regular paper-less materialized form. (That is, in the form of a digital Certificate). Also, I think there is a way to convert these materialized bonds to DEMAT form, so I am not worried about making a decision right now, I will do my fair share of research and then decide whether I want them in DEMAT form or not. So, if you want a follow up on that, make sure to follow me here on Medium.
So, coming back to the application, I have made a Service Request with my Bank and that has blocked the money from my account, this block is very much similar to what happens during an IPO subscription.
Now, the bank will create a Request with RBI for the issuance of the Bonds on my behalf. RBI has a portal called eKuber where these requests are made. The bank might make the request immediately or might take a couple of days to do that. I think the investors don’t have direct access to this portal so we can’t directly check that.
After the request has been made from the bank, we will get an email from eKuber Helpdesk (ekuberhelpdesk@rbi.org.in). This is probably a no-reply-email. The first email we will get will be of a Confirmation Receipt that the request has been made to RBI for issuance and the details of the investor will be mentioned here. It is a good time to cross-verify all the details at this step as the Bond has not been issued yet and if there is a discrepancy, then we can get it fixed by mailing it to RBI. (Email ID for RBI support given at the last of this story). This is how the Confirmation Receipt will look like. 👇
We should know that this is not the actual certification of holding. Instead, this is just a confirmation certificate issued to validate our purchase. After another couple of days, we will get a notification from our bank that the money has been deducted. This should not be confused with a double deduction or something, it’s just that the blocked money has been sent to RBI for issuance.
At the date of Settlement, which is mentioned in the Tranche list as well as in the Confirmation Receipt, there will be another email from eKuber helpdesk. This email will contain the actual Certificate of Holding for the applied Sovereign Gold Bond. It will look something like this. 👇
Sometimes it might take a couple of days or even weeks after the Settlement date for RBI to issue the SGB. So, if the bond is not received on the date of settlement, then I would wait for around a month or so and then email RBI for a follow-up on the situation.
It is worth noting that the Interest of these bonds will be credited to the account mentioned while Issuance. However, as I mentioned earlier, for bonds issued in DEMAT form, I am collecting knowledge at the moment and once I have sufficient information to make a decision, I will write a follow-up story. Hence, if you want to know more about DEMAT SGB, then you should consider following me.
Since we have applied online using our Bank’s portal, they already have our KYC information and prefilled that for us while making the SGB application. However, if the KYC is not done, then we need to fill in that information otherwise we won’t be able to purchase the bonds.
The offline process is very much similar, just that instead of going to a website, we need to go to the branch of the bank/post office and fill the form there. Also, the discount of ₹50 per gram will not be applicable then. But if someone wants to do that, it is an option. After filling, other things are pretty much the same and if the investor doesn’t have an EMail Id and doesn’t want the bond in a DEMAT form, then the investor needs to collect the physical certificate from the same branch by visiting again.
Now, coming to the Bonds in DEMAT form… While applying for a subscription, there is an option to get them in DEMAT form for which we need to have a DEMAT account (obviously!). And we need to fill in the Depository Participant Identifier and the Client Security Number, which can be found in the DEMAT portal or with the Broker. For example, one of my DEMAT accounts are with Groww, so I can check those details in the Profile Setting👇
Now after adding that, the bond will be issued in the DEMAT form and will start showing in my DEMAT account. Which I can then trade on the Stock Exchanges like normal Stock.
That means I can buy an SGB from the Secondary Market as well. For example, in Groww, I can search for bonds expiring June 2028 and I can see that as follows. 👇
So, if I buy from a Stock Market, it will show just like other stocks in my DEMAT account. Having SGB in DEMAT gives me the flexibility to sell and exit before Maturity. However, currently, I have all my SGB in the form of digital Certificates and I am researching whether it is good for me to have them in DEMAT form or not.
So, that was how Sovereign Gold Bonds can be purchased. If you want to know why I prefer investing in SGB, or Gold in general, then you can check the stories where I have explained why I think Gold is a good investment and about various types of Gold Investments. 👇
If you face any issues with the SGB or have any queries, RBI has created a separate dedicated email where you can get your queries resolved. You can reach out to them at sgb@rbi.org.in. This can be found under point 37 of the FAQ of the official RBI Webpage.
So, if you found this helpful, consider showing some love by applauding below and if you want more of similar content, then consider following me because I will be regularly sharing stories about various financial instruments towards reaching my goal of being Financially Independent someday.
Also, if you also want to get started with Investments on Groww App. You can use my referral link (https://groww.app.link/refe/aayusharyan). I prefer it for my long-term investments because currently, it has ₹0 Account Maintainance Charges, so I don’t have to pay them for just holding my stocks for the long term. Full disclosure, I will get some sort of referral bonus if you register using my referral link.
