Gold Schemes Guidelines Issued by the RBI

The Government of India introduced three key gold investment schemes in 2015 to offer a safer and more convenient way to invest in gold without the hassle of physical storage. These schemes are the Sovereign Gold Bond (SGB) Scheme, the Indian Gold Coin (IGC) Scheme, and the Gold Monetization Scheme (GMS). They aim to reduce gold imports, put idle gold to use, and let investors benefit from rising gold prices while earning interest. The Reserve Bank of India (RBI) provides specific guidelines for each scheme, detailing their features, limits, and benefits.

Check out the RBI rules for gold schemes provided by the government:

Sovereign Gold Bond (SGB)

A. What is the SGB Scheme?

The SGB is a government security, with denominations in grams of gold. In simple words, this bond is a substitute for storing physical gold valuables. Investors have to pay the required issue price in cash, after which they can redeem the bond in cash post-maturity.

This scheme was launched by the Government of India in November 2015 as an alternative investment option to storing physical gold. Anybody who is an Indian resident, as defined under the Foreign Exchange Management Act, 1999, can invest in SGB.

Individuals, trusts, Hindu Undivided Family (HUF), universities, and charitable institutions are eligible. Individual investors whose residential status has changed from resident to non-resident can hold SGB till early redemption/maturity.

The RBI provides SGB issues in different tranches, which are available via brokers, banks, and post offices. As per the RBI’s gold scheme guidelines, eligible investors can submit their applications to the ROs (Receiving Offices) at the branches either directly or through agents.

Branches can receive applications during normal banking hours on the weeks of subscription as notified by GOI/RBI from time to time. You need to make the subscription of the form in the prescribed application Form A.

The ‘PAN details,’ issued by the Income Tax Department, must accompany your application. Relevant additional details may be obtained from the applicants, where necessary. The RBI usually specifies the denominations of bonds in multiples of grams of gold, with 1 gram of gold as a basic unit. 

The minimum investment allowed for an individual or an institution is fixed at one gram of gold. The yearly investment limit of not more than 4 kg also applies to an individual. The maximum limit for subscription for trusts and other similar notified entities is 20 kg. 

Banks generally accept cash of up to ₹20,000 for investment in SGBs. In case of a higher investment, you can pay through a cheque, demand drafts, or electronic banking. Note that you have to draw a cheque or demand draft in favour of the RO.

The payments for applications received for SGBs to be held in RDG (Retail Direct Gilt) Account shall be made through electronic banking only. On receipt of the complete application as above, the ROs shall issue an acknowledgement receipt in Form B.

The customer may approach the Depository Participant with a request for re-materialisation of the bonds with the details of his holding. They may also specify the RO and bank account details through which the bonds will be serviced pursuant to re-materialisation. The information can include:

• Name of bank and branch
  

• Account number
  

• IFSC
  

• Type of account
  

B. Key Features of the Scheme

The duration of the bond is 8 years, wherein you can choose an exit option after 5 years on the date of interest payment. According to the RBI gold scheme laws, the RO/depository shall inform the investor about the date of maturity of the Bond, 1 month before its maturity.

The Bond shall be repayable on the expiration of 8 years from the date of issue of the bond. The price of the SGB will be in Indian Rupees. 

The closing price depends on the previous 3 business days’ average closing price of gold worth 999 purity as published by IBJA (India Bullion and Jewellers Association Ltd). 

The RBI guidelines note that “On maturity and in case of premature redemption, the Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on a simple average of the closing price of gold of 999 purity of previous week (Monday to Friday) for SGBs issued under tranche 1 to 9 and previous three working days for tranches issued thereafter at the rate published by the India Bullion and Jewellers Association Limited.”

The redemption proceeds shall be credited to the bank account of the customer. The interest rate for SGB is calculated at 2.50% annually, and the last SGB interest is cumulatively paid along with the principal at maturity.

The interest on the bonds, as applicable, shall be paid on a half-yearly basis. The amount will be credited by RBI to the bank account of the holder.

You can use the bonds as collateral security for any loan. The following laws govern the creation of a pledge, hypothecation, or lien on the bonds: 

• Section 28 of the Government Securities Act, 2006
  

• Regulations 21 and 22 of the Government Securities Regulations, 2007
  

The LTV ratio for such loans against bonds will be similar to the standard gold loan RBI rules.

Disclaimer: The guidelines stated here refer to the RBI circular RBI/2021-2022/114 on the ‘Sovereign Gold Bond Scheme of the Government of India (GoI) - Procedural Guidelines.

A. What is the IGC Scheme?

The Indian gold coin is a part of the Gold Monetization Programme. The coin is the first-ever national gold coin minted in India. It has the National Emblem of Ashok Chakra engraved on one side and Mahatma Gandhi on the other side. 

These coins are available in denominations of 5, 10, and 20 grams.

B. When and Why Was the Scheme Implemented?

The Government launched this scheme in November 2015 to minimise the import of foreign-minted gold coins or bullion. The Indian Gold Coin & Bullion is unique in many aspects. 

It carries advanced anti-counterfeit features and tamper-proof packaging, offering additional benefits to customers.

C. Key Features of the Scheme

The Indian Gold Coin & Bullion are of 24-Karat purity, and all coins & bullion are hallmarked as per the BIS standards. Buyers are to disclose their PAN number and submit the required KYC documentation when purchasing IGC.

SPMCIL (Security Printing and Minting Corporation of India) will also mint and sell IGC through an online e-commerce platform and via multiple channels, including Airports. IGC is available in both 999 and 995 purity forms. These coins are minted in smaller denominations.

Banks are allowed to sell IGC based on the agreement between the respective bank and MMTC. Furthermore, the price of these coins is to be determined by the Metals and Minerals Trading Corporation of India (MMTC).

The price of Indian Gold Coins fluctuates depending on the gold rate in the international market. Customers can easily monetise these coins as they are backed by MMTC.

Investing in gold through RBI's schemes is simple and convenient. Here's how you can subscribe to these gold schemes:

Sovereign Gold Bond (SGB) Scheme

• Application Period: You can submit your application when RBI announces the opening of a new tranch

• How to Apply: Apply directly through banks, post offices, or authorised agents

• Required Documents: Complete Application Form A and provide your PAN details issued by the Income Tax Department

• Investment Amount: The minimum investment is 1 gram of gold, with a maximum of 4 kg for individuals and 20 kg for trusts, per financial year

• Payment Methods: You can pay by cash (up to ₹20,000), cheque, demand draft, or electronic banking. For RDG Account holders, only electronic payments are accepted.

• Acknowledgement: Upon submitting a complete application, the RO will issue an acknowledgement receipt under Form B.

IGC Scheme

• How to Subscribe: You can purchase IGC through authorised banks and online platforms managed by the Security Printing and Minting Corporation of India (SPMCIL)

• Denominations: Coins are available in 5, 10, and 20 grams with 24-Karat purity

• Required Documents: Provide your PAN number and KYC documentation at the time of purchase

• Pricing: The price of IGC is determined by the Metals and Minerals Trading Corporation of India (MMTC) and fluctuates based on international gold rates

Gold Monetization Scheme

• Application Process: Visit a designated bank and fill out the application form

• Deposit the Gold: Submit your gold at a Collection and Purity Testing Centre (CPTC)

• Submit Receipt: Following this, submit the deposit receipt to the bank within 30 days to receive your final deposit certificate.

By following these steps, you can easily invest in RBI’s gold schemes while ensuring compliance with the required guidelines.