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How surety bonds can be made at par with bank guarantees— explained

In a bid to make the surety bond business more attractive, the government is looking at making relevant changes in the Insolvency and Bankruptcy Code (IBC), PTI news reported. While presenting the Union Budget 2022-23, Finance Minister Nirmala Sitharaman said that the use of surety bonds as a substitute for bank guarantees will be made acceptable in government procurement.

What are surety bonds?

Surety bonds are third-party guarantees issued by the insurance companies on behalf of the applicant (i.e. on behalf of whom the guarantee is to be provided)

“Surety Bonds are issued to Beneficiaries and Authorities (i.e. corporations that accept the guarantee). Fundamentally, it is similar to any Non-Fund limits provided by banks to provide Bank Guarantees and LCs,” said Sanjay Kedia, CEO and Country Head, Marsh India Insurance Brokers.

Last week, IRDAI Chairman, Debasish Pandaurged stakeholders in the infrastructure sector to take advantage of offered surety bonds, which complement bank guarantees needed for large-scale funding.

Why Irdai chief stress the need to make use of surety bonds to complement bank guarantees?

IRDAI Chairman, Debasish Panda had mentioned that India is planning to spend almost ₹100 lakh crore+ on infrastructure in the next 5 years, which will generate a need for bonds worth almost ₹90 lakh crore in the next five years.

As per Sanjay Kedia, the current banking setup would urgently need additional support from alternative financing mechanisms to support such a demand for capital of this scale.

The IRDAI issued the Surety guidelines in 2022 which present a significant opportunity for Indian general insurers to complement the bank guarantee mechanism used by banks by providing alternative options for funding, he added.

Purpose of surety bonds

The purpose is to provide corporates an alternative for Non-Fund limits, which are more likely than not, uncollateralized and free of margin money/cash margins

As per Head, Marsh India, in some scenarios, the surety company can also provide a conditional guarantee, where the beneficiary is the private corporation and the chances of the unfair calling of the guarantee are minimised.

Benefits of surety bonds

Sanjay Kedia, CEO and Country Head, Marsh India listed four benefits of surety bonds

1)Diversified source of non-fund based limits

2)Easing of liquidity pressures

3)The ability for companies to participate in more orders

4)Project owners enjoy participation from a larger bidding group which helps them get a fair value for the bid

Source- Livemint

Sovereign Gold Bond: Govt to issue SGB in 2 series; Subscription dates, rates, other details explained in 10 points

The government will issue a tranche of sovereign gold bonds (SGBs) this month, and one more in February. The date for subscription for 2023-24 Series III is December 18-22, 2023, while Series IV is scheduled for February 12-16. The Bond is issued by the Reserve Bank on behalf of the Government of India.

2023-24 Series III

Date of Subscription: December 18 – December 22, 2023

Date of Issuance: December 28, 2023

2023-24 Series IV

Date of Subscription: February 12 – February 16, 2024

Date of Issuance: February 21, 2024

Key things to know before investing in SGBs of these series

1) The SGBs will be sold through Scheduled Commercial banks (except Small Finance Banks, Payment Banks, and Regional Rural Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

2) The SGBs will be restricted for sale to resident individuals, HUFs, Trusts, Universities, and Charitable Institutions.

3) The SGBs will be denominated in multiples of gram(s) of gold with a basic unit of One gram.

4) The tenor of the SGB will be for a period of eight years with an option of premature redemption after 5th year to be exercised on the date on which interest is payable.

5) The maximum limit of subscription shall be 4 Kg for individuals, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal year (April-March) notified by the Government from time to time. A self-declaration to this effect will be obtained from the investors at the time of making an application for a subscription. The annual ceiling will include SGBs subscribed under different tranches, and those purchased from the secondary market, during the fiscal year.

6) The price of SGB will be fixed in Indian Rupees based on a simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited (IBJA) for the last three working days of the week preceding the subscription period. The issue price of the SGBs will be less by ₹50 per gram for the investors who subscribe online and pay through digital mode.

7) The investors will be issued a Certificate of Holding for the same. The SGBs will be eligible for conversion into demat form.

8) The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.

9) The interest on SGBs shall be taxable as per the provision of the Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual is exempted. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of the SGB.

10) Know-your-customer (KYC) norms will be the same as those for the purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN, or TAN /Passport will be required. Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to individuals and other entities.

Source- Livemint

Sovereign Gold Bond Scheme 2023-24 Series II opens today; all you need to know

The Reserve Bank of India (RBI) has established the issue price of the Sovereign Gold Bond (SGB) for the September 2023 series at ₹5,923 per gram. The upcoming installment of the program will be available for subscription from September 11, 2023, to September 15, 2023.

In a press release pertaining to the price, date, and other particulars of the Sovereign Gold Bond, the RBI stated, Sovereign Gold Bond Scheme 2023-24 Series II will be open for subscription from September 11–15, 2023. The nominal value of the bond based on the simple average of closing price [published by the India Bullion and Jewellers Association Ltd (IBJA)] for gold of 999 purity of the last three working days of the week preceding the subscription period, i.e., September 06, September 07, and September 08, 2023, works out to ₹5,923 per gram of gold.

Buying SGBs at discounted prices

The SGB scheme is a government-backed investment instrument designed to enable investors to acquire gold without the need for physical possession. These bonds are denominated in grams of gold and are issued in multiples of one gram. The minimum investment allowed in SGBs is one gram, with a maximum limit of 500 grams per individual per fiscal year (April to March).

In collaboration with the Reserve Bank, the Government of India has resolved to provide a discount of ₹50 per gram below the face value to investors who apply online and complete the payment through digital channels. For these investors, the SGBs will be available at an issue price of ₹5,873 per gram of gold.

The SGBs come with an eight-year tenure and provide an annual interest rate of 2.5 per cent. This interest is paid twice a year, in the months of June and December. Upon maturity, the bonds are redeemed at the prevailing market price of gold.

The SGB scheme for the 2023-24 Series 2 will be available for purchase through various channels, including banks, the Stock Holding Corporation of India Ltd (SHCIL), designated post offices, and recognized stock exchanges, namely the NSE and the BSE.

This scheme is exclusively available for purchase by resident individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable Institutions.

Investment details

The SGB scheme imposes specific maximum investment limits based on the investor category. For individuals and HUFs, the maximum investment cap stands at 4 kg of gold per fiscal year, which runs from April to March. This means that both individuals and HUFs can invest up to 4 kg of gold collectively across various tranches during the financial year.

This investment limit applies cumulatively across different tranches within the same financial year. For example, if an individual invests 2 kg of gold in the initial SGB tranche in April, they may invest another 2 kg of gold in the subsequent tranche in May. However, the total investment within that financial year must not exceed 4 kg.

Additionally, this investment ceiling also applies when acquiring SGBs from the secondary market. If an individual buys 1 kg of SGBs from the secondary market in April, they can only purchase an additional 3 kg of SGBs from the secondary market in the same financial year.

These limitations are established by the government to curb excessive gold investments, given the volatile nature of the asset, with the aim of safeguarding investors from potential losses. If you intend to invest in the SGB scheme, it’s crucial to be mindful of these investment limits and carefully assess your financial objectives and risk tolerance before making investment decisions.

Redemption details

The redemption value of an SGB is determined based on the simple average of the closing price of gold with 999 purity over the previous three working days, as reported by the IBJA. This redemption value is denominated in Indian rupees.

To illustrate, if the closing price of gold on Monday, Tuesday, and Wednesday stands at ₹5000 per gram, the redemption price on Thursday will be ₹5000. This calculation hinges on the nominal value of the bond, which is the price at which it was originally issued.

The SGBs mature after an eight-year tenure, and they can also be redeemed prematurely, beginning from the fifth year. However, there is a penalty for early redemption. In the first year of premature redemption, the penalty is one per cent of the bond’s nominal value, and this decreases to 0.5 per cent for each subsequent year.

The SGBs represent an attractive investment avenue for those looking to invest in gold without the burden of physical possession. They provide a guaranteed annual interest rate of 2.5 per cent and enjoy government backing. Furthermore, the redemption value is tied to the prevailing market price of gold, ensuring investors receive a fair return on their investment.

Source- Mintgenie

SGB: Sovereign Gold Bond Scheme 2023-24 Series I issue price announced; check details

The latest Sovereign Gold Bond (SGB) tranche will open for subscription on June 19 and will close on June 23, 2023. The Reserve Bank of India (RBI) has kept the settlement date of this tranche of Sovereign Gold Bond Scheme 2023-24 Series as June 27, 2023

Sovereign Gold Bond Scheme 2023-24 Series I – Issue Price

The issue price of the SGB Series I during the subscription period will be Rs 5,926 per gram, according to an RBI press release issued on June 16, 2023.

How is price calculated?

The bond’s nominal value is based on the simple average of the closing price [published by the India Bullion and Jewellers Association Ltd (IBJA)] for gold of 999 purity on the last three working days of the week preceding the subscription period, namely June 14, June 15, and June 16, 2023, which works out to 5,926/- (Rupees Five thousand nine hundred and twenty six only) per gram of gold.

Discount on subscription

In collaboration with the Reserve Bank of India, the Government of India has agreed to offer a discount of Rs 50 per gram on the issue price to investors who apply online and pay in digital manner.
The issue price of a Gold Bond for such investors will be Rs 5,876 per gram of gold.

Payment option

Payment to buy SGB can be made in cash up to Rs 20, 000 for higher amounts in draft, cheque or electronic banking

Where can investors buy SGB

SGBs will be sold through the following channels

Scheduled Commercial banks (except Small Finance Banks, Payment Banks and Regional Rural Banks), Stock Holding Corporation of India Limited (SHCIL),
Clearing Corporation of India Limited (CCIL),
Designated post offices (as may be notified) and
Recognized stock exchanges either directly or through agents.

SGB interest

The investors will be paid at a fixed rate of 2.50 percent per annum payable semi-annually on the nominal value.

Tax treatment

According to the provisions of the Income Tax Act of 1961 (43 of 1961), interest on SGBs will be taxed. The capital gains tax arising on redemption of SGB to an individual is exempted. Long-term capital gains resulting from the transfer of SGBs will be eligible for the indexation benefits.

Source- Economictimes

Sovereign Gold Bond (SGB) Scheme 2021-2022

In India, gold has traditionally been used as an instrument of saving along with its use in jewelry for marriages and festive occasions.

Over the last few decades, gold coins and bricks are being used as a saving medium. In general most of the gold that is imported into the country was rarely put to use regularly.

To take advantage of this habit, the government came out with a novel scheme that would incentivize gold saving as well as prevent the
import of gold.

The government decided to launch a Sovereign Gold Bond scheme where instead of purchasing gold in physical form one can do so in electronic form, just like shares.

Date of Issue

The date of issuances shall be as per the details given in the calendar below:

Tranche Date of Subscription Date of Issuance

2021-22 Series VII October 25 – 29, 2021 November 02, 2021

2021-22 Series VIII November 29- December 03, 2021 December 07, 2021

2021-22 Series IX January 10-14, 2022 January 18, 2022

2021-22 Series X February 28- March 04, 2022 March 08, 2022

What is the Gold Bond Scheme?

Sovereign Gold Bonds, hereafter referred to as SGB, are government securities denominated in grams of gold. The Bond is issued by the Reserve Bank of India on behalf of the Government of India.

Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. These bonds act as a proxy for holding physical gold.

Why are SGB called Bonds?

SGB’s are just like any other bonds as the bearer of the
the instrument is entitled to interest payment.

The Bonds bear interest at the rate of 2.50 percent per annum on the amount of initial investment.

This interest will be credited semi-annually to the investor’s bank account and the last final interest will be payable on maturity along with the principal. The tenure of each SGB is for eight years.

At what price are the SGBs sold?

The nominal value of SGB will be fixed based on a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Ltd, for the last 3 business days of the week preceding the subscription period.

The price of gold for the relevant tranche will be published on the RBI website two days before the issue opens.

What are the advantages of SGB over physical gold?

The risks and costs of storage are eliminated.
The SGB offers a superior alternative to holding gold in physical form.
The bonds are held in the RBI or Demat form books, eliminating the risk of loss of scrip, etc.
SGB is free from issues like making charges and purity in the case of gold in jewelry form.
These bonds carry a sovereign guarantee since they are issued by the government.
The SGB can be used as collateral.
The buyer gets paid interest on the money invested, which is not possible when holding physical gold.

Who all are eligible to invest in SGB?

A resident Indian as defined under the Foreign Exchange Management Act (FEMA), 1999 is eligible to invest in SGB.

The set of eligible investors include individuals, HUFs, Trusts, Universities, and charitable institutions.

Joint holding and minors are also eligible to invest in SGB. If an individual investor changes his residential status from resident Indian to non-resident he may continue to hold SGB till early redemption/maturity.

What are the tax implications of investing in SGBs on both – interest and capital gains?

Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961.

The capital gains tax arising on redemption of SGB to an individual has been exempted.

The indexation benefits will be provided to long terms capital gains arising to any person on transfer of SGB.

Is there a minimum and maximum limit of investment for SGB?

Yes, the SGB is issued in denominations of one gram of gold and multiples thereof.

The minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF), and 20 kg for trusts and similar entities notified by the government.

Each member of the family can buy 4 kg of SGB in her or her name. In the case of joint holding, the limit applies to the first applicant.

Is premature redemption allowed?

While the tenor of the bond is 8 years, early redemption or encashment is allowed after the fifth year from the date of issue on coupon payment dates.

The proceeds will be credited to the customer’s bank account provided at the time of applying for the SGB. The SGB investor also has the option of selling the bonds prematurely anytime on stock exchanges.

Such sales would attract capital gains tax at the same rate as for physical gold.

Sovereign Gold Bond (SGB) Scheme 2020-2021

In India, gold has traditionally been used as an instrument of saving along with its use in jewelry for marriages and festive occasions.

Over the last few decades, gold coins and bricks are being used as a saving medium. In general most of the gold that is imported into the country was rarely put to use regularly.

To take advantage of this habit, the government came out with a novel scheme that would incentivize gold saving as well as prevent the
import of gold.

The government decided to launch a Sovereign Gold Bond scheme where instead of purchasing gold in physical form one can do so in electronic form, just like shares.

Date of Issue

The date of issuances shall be as per the details given in the calendar below:

Sr. No Tranche Date of Subscription Date of Issuance

2020-21 Series IX Dec-28-2020 – Jan 01-2021 January 05, 2021
2020-21 Series X Jan-11-15-2021 January 19, 2021
2020-21 Series XI Feb-01- 05-2021 February 09, 2021
2020-21 Series XII Mar-01- 05-2021 March 09, 2021

What is the Gold Bond Scheme?

Sovereign Gold Bonds, hereafter referred to as SGB, are government securities denominated in grams of gold. The Bond is issued by the Reserve Bank of India on behalf of the Government of India.

Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. These bonds act as a proxy for holding physical gold.

Why are SGB called Bonds?

SGB’s are just like any other bonds as the bearer of the
the instrument is entitled to interest payment.

The Bonds bear interest at the rate of 2.50 percent per annum on the amount of initial investment.

This interest will be credited semi-annually to the bank account of the investor and the last final interest will be payable on maturity along with the principal. The tenure of each SGB is for eight years.

At what price is the SGBs sold?

The price of gold for the relevant tranche will be published on the RBI website two days before the issue opens.

What are the advantages of SGB over physical gold?

The risks and costs of storage are eliminated.
The SGB offers a superior alternative to holding gold in physical form.
The bonds are held in the books of the RBI or Demat form eliminating the risk of loss of scrip, etc.
SGB is free from issues like making charges and purity in the case of gold in jewelry form.
These bonds carry a sovereign guarantee since they are issued by the government.
The SGB can be used as collateral.
The buyer gets paid interest on the money invested, which is not possible when holding physical gold.

Who all are eligible to invest in SGB?

A resident Indian as defined under the Foreign Exchange Management Act (FEMA), 1999 is eligible to invest in SGB.

The set of eligible investors include individuals, HUFs, Trusts, Universities, and charitable institutions.

What are the tax implications of investing in SGBs on both – interest and capital gains?

Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961.

The capital gains tax arising on redemption of SGB to an individual has been exempted.

The indexation benefits will be provided to long terms capital gains arising to any person on transfer of SGB.

Is there a minimum and maximum limit of investment for SGB?

Yes, the SGB are issued in denominations of one gram of gold and multiples thereof.

Each member of the family can buy 4 kg of SGB in her or her name. In the case of joint holding, the limit applies to the first applicant.

Is premature redemption allowed?

While the tenor of the bond is 8 years, early redemption or encashment is allowed after the fifth year from the date of issue on coupon payment dates.

Such sales would attract capital gains tax at the same rate as for physical gold.

9 things to know about Sovereign Gold Bond

The seventh(7) series of Sovereign Gold Bond Scheme 2020-21 will open for subscription today (12th Oct 2020). The price of the latest SGB issue has been fixed at Rs 5,051 per gram of gold.

Investors applying for the issue online will get a discount of Rs 50 per gram. So the price for them will be Rs 5,001 per gram. The issue will remain open for one week through October 16.

The latest SGB issue comes at a time when gold prices have corrected over 12% from its August high of Rs 56,200 per 10 grams.

9 things to know about Sovereign Gold Bond

1) Gold bonds have a maturity period of eight (8) years with an exit option after the fifth year. However, if an investor is eyeing an exit before the lock-in period of 5 years, they can always get out of the bonds by selling it on stock exchanges. The redemption price is based on the then prevailing price of gold.

2) Price of the issue has been fixed taking the simple average closing price for gold of 999 purity of the last three business days of the week preceding the subscription period. The price published by the India Bullion and Jewellers Association Ltd is used for this purpose.

3) One can apply for a minimum of 1 gram gold in the issue. An Individual and a HUF can invest up to four kg in SGBs in each financial year. Other eligible entities can invest up to 20 kg in a year. These bonds can be bought from banks, Stock Holding Corporation, post offices, and recognized stock exchanges.

4) Any resident under Foreign Exchange Management Act (FEMA) can invest in SGBs. An individual, HUF, trusts whether a public or private and university can invest in SGBs. Even investment on behalf of a minor can be made by his guardian. An NRI cannot invest in these bonds but is allowed to hold these bonds received as a nominee of a resident investor.

5) If you hold SGBs till maturity, there will be no capital gain tax on the investment. Further, you will get an interest of 2.5% annually, which will be paid on a semi-annual basis.

6) SGBs are a superior alternative to holding physical gold. Also, there is no risk of theft, and the costs of storage are eliminated in the case of SGB.

7) SGBs are issued by the Reserve Bank of India on behalf of the government.

8) Documents that are required for applying these bonds are Voter ID, Aadhaar card/PAN, or TAN /Passport.

9) Unlike in physical gold, GST is not levied on SGBs.

SGBs should be a part of your investment portfolio as it helps in diversification. According to us, 5-10% of an individual’s portfolio should be invested in gold.

All about GOI 7.15% Floating Bonds

The government has announced the launch of the Floating Rate Savings Bonds, 2020 (Taxable) with an interest rate of 7.15 percent. The bonds are available for subscription from July 1, 2020.

As per the Reserve Bank of India (RBI) press release, the interest rate on these bonds will be reset every six months, the first reset being on January 01, 2021. There is no option to pay interest on a cumulative basis i.e. interest will be payable every six months instead of having an option to receive it at maturity.

These bonds have been launched in lieu of the earlier withdrawn 7.75% RBI bonds. The 7.75% RBI bonds offered a fixed interest rate for the tenure of the bonds.

Further, they also offered the option to receive the interest either in a cumulative (payable at maturity) and a non-cumulative basis (payable every six months).

Here is a look at the features of the newly launched floating rate bonds.

Who can invest in these bonds?
Individuals (including Joint Holdings) and Hindu Undivided Families (HUF) are eligible to invest in these bonds. NRIs cannot invest in these bonds.

How much can you invest?
There will be no maximum limit for investment in the bonds. The minimum investment starts from Rs 1,000 and in multiples of Rs 1,000, thereof.

What is the tenure of the bonds?
The bonds shall be repayable on the expiration of 7years from the date of the issue. Premature redemption shall be allowed for specified categories of senior citizens. This is similar to the earlier withdrawn 7.75% RBI Taxable Bonds.

How much is the interest and how will be payable?
The interest on the bonds is payable half-yearly on 1st January and 1st July every year. On 1st January 2021, interest shall be payable at 7.15%.

The interest rate for the next half-year (which is due on July 1, 2021) will reset every six months, the first reset being on January 1, 2021. There is no option to pay interest on a cumulative basis.

This would mean that once the interest on bonds is due, it will be credited to the investor’s bank account at the same time instead of payable at maturity.

How will the interest be taxed?
Interest received from these bonds will tax as per the income tax slab applicable to your income. Further, TDS will be applicable on the interest income.

How to invest in these bonds?
Investment in these bonds can be done online. Our representative will help you with the process.

Points to remember

• The bonds are not eligible for trading in the secondary market and cannot be used as collateral for loans from banks, financial institutions, NBFCs, etc.
• A sole holder or a sole surviving holder of a bond, being an individual, can make a nomination.
• The bonds shall not be transferable except transfer to a nominee(s)/legal heir in case of death of the holder of the bonds.

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