Ruchi SrivastavaWe are in an era of women’s empowerment, and financial independence is now a key focus. By 2025, this priority has led to tailored investment options gaining popularity. One standout choice is the Sovereign Gold Bond (SGB) Scheme, offering women a valuable opportunity to diversify their portfolios and secure their financial future.
As we all know Gold has always been one of the most trusted and preferred investment choices in India. To reduce its excessive imports, the Government of India launched the Sovereign Gold Bond (SGB) scheme in 2015. Let’s dive deeper into this blog to explore how the Sovereign Gold Bond works and the promising opportunities it holds for women in India.
What is the Sovereign Gold Bond Scheme?
Sovereign Gold Bonds (SGBs), issued by the RBI, serve as certificates representing gold in grams, allowing individuals to invest in gold without the hassle of storing physical assets. These bonds are regarded as a secure investment option since gold prices tend to remain stable and are less affected by market volatility. Given the strong demand and lasting appeal of gold, its value typically appreciates over time, making it an attractive investment opportunity. The Government of India introduced the Sovereign Gold Bond Scheme to offer investors a way to invest in gold without the difficulties of storing physical gold.
Mr. Nish Bhatt, Founder & CEO of Millwood Kane International, states, “The bond provides a guaranteed return of 2.5% interest, paid twice a year, along with the advantage of gold price appreciation. It is tax-efficient and removes the inconvenience of storing gold or incurring making charges.
Why should women start investing in Sovereign Gold Bonds?
- Investment Range: Through the Sovereign Gold Bond (SGB) scheme, investors can purchase between 1 gram and 4 kilograms of gold.
- Cultural Significance: India’s strong cultural connection to gold, especially among women, makes it one of the world’s largest gold markets.
- Gold’s Cultural Value: Dr. Nish Bhatt explains that gold is cherished by women in India, often used as adornment, and no Indian celebration is complete without gold purchases.
- Strategic Investment: Women can consider adding Sovereign Gold Bonds to their investment portfolio for better returns and convenience, instead of accumulating physical gold for children.
- Gold for All Investors: Dr. Bhatt stresses that gold should be part of every investor’s portfolio, recommending 5-15% allocation based on risk appetite, as it acts as a stable asset and hedge.
Features of Sovereign Gold Bonds
- Government-Backed Security:
As per the Reserve Bank of India (RBI), Sovereign Gold Bonds (SGBs) are issued under the Government Security Act, 2006, by the RBI on behalf of the central government. This government-backed assurance makes SGBs one of the safest investment options in India, eliminating the risk of default. The only risk involved is market-driven fluctuations in gold prices. - Simplified Gold Investment:
Introduced in November 2015 under the Gold Monetisation Scheme, SGBs address the challenges of storing physical gold, such as bullion or jewellery, making gold investments easier and safer. - Proof of Investment:
Upon purchasing SGBs, investors receive a holding certificate as proof of ownership. This certificate can also be digitized and added to Demat accounts for enhanced security. - Steady Long-Term Returns:
SGBs provide attractive long-term returns, as gold prices generally appreciate over time. During stock market volatility, investors often turn to gold as a safe haven since it maintains or increases its value, unlike other financial assets. - Inflation Protection:
Gold typically outperforms inflation, making it a reliable choice for preserving and growing wealth. SGBs allow investors to benefit from real appreciation, helping them accumulate substantial wealth over time. - Maturity Period:
SGBs have a maturity period of eight years, making them ideal for individuals seeking a secure, long-term investment with significant growth potential. - Loan Collateral:
SGBs can be pledged as collateral for loans. Under RBI’s Loan-to-Value (LTV) regulations, investors can borrow up to 75% of the bond’s current market value from any scheduled financial institution.
Advantages and Disadvantages of Investing in the Sovereign Gold Bonds
| Advantages | Disadvantages |
| Government-Backed Safety: SGBs are issued by the RBI on behalf of the government, offering a secure investment with minimal risk. | Subject to Market Fluctuations: The value of SGBs is influenced by changes in gold prices, which can affect returns. |
| Interest Earnings: Investors receive a fixed 2.5% annual interest, paid semi-annually. | Liquidity Constraints: Although SGBs can be redeemed after 5 years, they have an 8-year minimum holding period, restricting access in the short term. |
| No Need for Storage: Unlike physical gold, SGBs do not require storage or security arrangements. | Interest Taxation: The interest earned on SGBs is subject to income tax, potentially reducing overall returns. |
| Potential for Value Growth: Gold’s value generally increases over time, boosting the value of the bonds. | Lack of Physical Ownership: Investors do not own physical gold, which may be a disadvantage for those preferring tangible assets. |
| Tax Exemption: Capital gains tax is waived if SGBs are held until maturity. | Limited Redemption Flexibility: Redemption is possible only after 5 years, limiting flexibility in accessing funds early. |
| Convenient Purchase Process: SGBs can be bought through designated banks, post offices, and stock exchanges, making them easily accessible. | Collateral Limitations: SGBs can be used as collateral in specific cases, offering less flexibility compared to physical gold. |
How to start Investment in Sovereign Gold Bonds?
- Application: Investors can apply directly through designated commercial banks, post offices, the Stock Holding Corporation of India (SHCIL), and stock exchanges (NSE and BSE), providing easy access to the gold investment scheme.
- Documentation: Complete the application form and submit the required identification documents. And make sure that you read and understand all terms and conditions of the Sovereign Gold Bond scheme.
- Payment: Payments can be made via various methods, including digital transactions, which come with a discount on the issue price.
- Issue Price: The price is determined based on the average closing price of 999 purity gold, as published by the India Bullion and Jewellers Association (IBJA).
- Tenure and Exit: SGBs come with an eight-year maturity period, and investors can choose to exit from the fifth year onward, on the interest payment dates. This flexibility is a key feature of the investment plan.
Final Thoughts
The Sovereign Gold Bond Scheme combines security, profitability, and ease, making it a perfect option for women aiming to strengthen their financial portfolio in 2025. By investing in SGBs, women can make a meaningful move toward financial independence and long-term wealth accumulation, all without the complications of holding physical gold. The SGB scheme allows women to take advantage of this asset’s benefits in a secure and affordable way, making it an essential option for smart investing in 2025.
