J&K Bank Begins Gold Bond Distribution



J&K Bank has started distribution of the Sovereign Gold Bonds (SGB) issued by Reserve Bank of India (RBI) on behalf of union government through its 75 designated branches. Facility to invest in the bonds online is also on the cards and will be launched shortly.

The decision was taken by the bank soon after PM Narendra Modi last week launched three schemes including the Sovereign Gold Bonds Scheme.

The bonds would be providing an excellent investment opportunity for people having gold. The scheme offers guaranteed interest besides better and secure returns to the investors.

SGBs are government securities denominated in grams of gold aimed at bringing down gold imports and providing an alternative to physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The bond is issued by the Reserve Bank of India on behalf of the union government.

The quantity of gold for which the investor pays is protected since he receives the ongoing market price at the time of redemption or premature redemption. The bond offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated.

The tenor of the Bond is for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates. RBI has fixed the issue price of the sovereign gold bond for this tranche at Rs 2,684 per gram of gold.

Investors are assured of the market value of gold at the time of maturity and periodical interest. The investors will get interest on the gold bond at 2.75 per cent which will be subject to tax and on maturity will get the prevailing value of gold at that time.

In declining market price of gold, the investor will however not lose in terms of the units of gold which he has paid for.

The bonds can be also be held in the demat form (electronic form) eliminating risk of loss of bond certificate.

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