The second tranche of the Sovereign Gold Bonds (SGB) opened for subscription on August 22 and will close on August 26, 2022. The RBI issues SGBs on behalf of the government of India at a set issue price.
The Gold Bonds issued under this scheme may be held by a trust, a HUF, a charitable institution, a university, or a person resident in India who is an individual, in his capacity as such, or on behalf of a minor child, or jointly with any other individual.
Investments like equity shares can be used to take a loan from a financial institution like a bank. In the same way, can one’s investment in SGBs be used to get a loan? Sovereign Gold Bonds (SGB) can be used as security for loans from banks, financial institutions, and non-banking financial companies (NBFC).
Also read: Sovereign Gold Bonds Scheme opens for subscription on August 22: What is the issue price of SGB?
According to RBI’s FAQs on SGB, “Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loan prescribed by RBI from time to time. Granting loan against SGBs would be subject to decision of the bank/financing agency and cannot be inferred as a matter of right.”
Banks give loans against sovereign gold bonds, which can be used to fund personal expenses or other legitimate needs. Sovereign Gold Bond pledges are accepted as security in both demat and physical forms.
Maximum and minimum SGB loan amount
The minimum and maximum loan amount varies with banks, such as SBI offers minimum loan amount per individual is Rs 20,000 and maximum loan per is Rs 20 lakhs per individual. IN PNB, minimum loan amount is Rs 50,000 and maximum - Rs. 10 lakhs. The minimum and maximum loan amount in Union Bank of India is Rs 50000 and Rs25 lakhs, respectively. Similar to this, the margin for the loan also varies.
Security
Some banks such as Union Bank of India offer SGB loans only demat form, you need to check with the desired bank regarding the same. Only Sovereign Gold Bonds held in dematerialized form with the depository participant of NSDL will be eligible for loans, as per the PNB website. While Federal bank, pledge of sovereign gold bonds in physical certificate form as well as in demat form.
Tenor
SBI
- Overdraft : 36 months
- Demand Loan : 12 months
Union Bank of India
- Demand Loan: 12 months
- Overdraft: 24 months- subject to annual review
Processing fee
SBI charges a processing fee of 0.50% of the loan amount plus applicable service tax or Rs 500 plus applicable tax, whichever is higher. Federal bank charges a processing fee of 0.50% plus taxes of the limit subject to a minimum of Rs 1000 plus taxes.
(Your legal guide on estate planning, inheritance, will and more.)
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