SBI Revamped Gold Deposit Scheme Vs Sovereign Gold Bonds
Recently, SBI has revamped its gold deposit scheme. SBI Revamped Gold Deposit scheme (R-GDS) provides interest rates for short term, medium term and for long term on the gold deposits. When Sovereign Gold Bonds are also offering interest rates for medium to long term, as an investor, you might be getting doubt which is a better gold scheme. What is SBI Revamped Gold Deposit Scheme (R-GDS)? What are the interest rates offered on SBI R-GDS? What kind of gold is accepted under this SBI Gold deposit scheme? Among SBI Revamped Gold Deposit Scheme Vs Sovereign Gold Bonds – Which is better?
What is SBI Revamped Gold Deposit Scheme (R-GDS)?
SBI Revamped Gold Deposit Scheme (R-GDS) is offered to mobilize idle gold in the country and to put it into productive use. Investors would also get interest for short term to long term depending on the tenure. In net summary, investors would get interest on their gold deposits along with safety from SBI (Short term deposits) and Govt of India (Medium and long term deposits).
Features of SBI Revamped Gold Deposit Scheme (R-GDS)
In simple terms, this gold deposit scheme gets gold deposits from investors and pays interest on periodical intervals.
One can deposit gold of a minimum of 30 grams.
There is no limit on maximum deposit of gold.
This gold deposit scheme offers interest for short term, medium term and long term investments.
Gold is accepted in the form of raw gold like Gold Bars, Coins and Jewelry. However, it would exclude stones and metals.
SBI Nodal Branch from Mumbai would issue gold deposit certificate in terms of pure gold contents. This certificate would be directly sent by a Nodal Branch to investors.
Investors would get interest on the gold deposits after refinement of gold into tradeable bars or 30 days of receipt whichever is earlier.
What are the interest rates paid under SBI Revamped Gold Deposit Scheme?
There are 3 types of fixed deposits offered under this scheme:
1) Short Term Bank Deposit (STBD) – 1 to 3 years
2) Medium Term Government Deposits (MTGD) – 5 to 7 years
3) Long Term Government Deposit (LTGD) – 12 to 15 years.
Now let us look at the interest rates paid under each of these schemes
(i) STBD: The current interest rates are as under:
For 1 year: 0.50% p.a.
Above 1 year up to 2 years: 0.55% p.a.
Above 2 years up to 3 years: 0.60% p.a.
STBD: Non-Cumulative (on 31st March) every year or Cumulative (On Maturity) interest on maturity. The principal and interest on STBD shall be denominated in gold. On maturity Interest for the broken period will also be paid.
(ii) MTGD: 2.25% p.a.
(iii) LTGD: 2.50% pa.
The depositor will have the option to receive payment of simple interest annually or cumulative interest (compounding annually) on maturity. The option to be exercised at the time of deposit.
How the repayment is done under SBI Revamped Gold Deposit Scheme?
Each of the deposit made would go with specific guidelines.
1) Short Term Deposit: Investors can take repayment of principal either in gold units or equivalent rupees as on the date of maturity.
2) Medium Term Deposit: Redemption of the deposit will be in Gold or INR equivalent of the value of gold as per then prevailing price of gold. However, a 0.20 % administrative charge will be levied in case of redemption in Gold.
3) Long Term Deposit: Here too, redemption of the deposit will be in Gold or INR equivalent of the value of gold as per then prevailing price of gold. However, a 0.20 % administrative charge will be levied in case of redemption in Gold.
What are premature withdrawal rules in SBI Revamped Gold Deposit Scheme?
Here are the premature withdrawal rules under this scheme
1) Short Term Deposit: Premature withdrawal is allowed after a lock-in period of 1 year with a penalty of applicable interest rate.
2) Medium Term Deposit: Premature withdrawal is allowed after 3 years with a penalty on the applicable interest rate.
3) Long Term Deposit: Premature withdrawal is allowed after 5 years with a penalty on the applicable interest rate.
Interest penalty applicable for MTGD & LTGD will be as per RBI Notification.
Do all SBI banks offer revamped gold deposit schemes?
Only selected branches of SBI would be accepting revamped gold deposit schemes. Here are the list of the branches.
1) P B Branch, New Delhi
2) SME Branch Chandni Chowk, Delhi
3) Coimbatore Branch
4) Hyderabad Main Branch
5) Thyagarayanagar Branch, Chennai
6) Bullion Branch, Mumbai
7) Bangalore Main Branch
SBI Revamped Gold Deposit Scheme Vs Sovereign Gold Bonds – Which is better?
Now let us look at the major differences between these 2 gold schemes.
Mode of Deposits: SBI accepts gold deposits under this revamped gold scheme. However, Sovereign gold bonds are issued based on investing money. Means, under Sovereign Gold Bonds, there is no gold deposits to be done by investors.
Interest Rates: Since Sovereign gold bonds tenure is 8 years with an option of premature after 5 years, let us compare the interest rates of 5+ years. Sovereign gold bonds offer 2.5% interest rates with 8 years tenure. SBI Gold deposit scheme offers 2.25% for medium term deposit scheme of 5 to 7 years. Hence sovereign gold bonds would score high here.
Tenure: Sovereign gold bonds would offer 8 year tenure with the option to withdraw after 5 years. SBI offers 1 to 15 year period.
Simplicity to invest and exit: SBI Gold bond scheme is not offered at all branches of SBI. You need to visit main branches of the SBI in respective city it is offering. Sovereign Gold Bonds can be applied in several easy methods, including demat account. These bonds can be easily sold on stock exchanges if buyers are available.
Conclusion: SBI scheme is based on gold deposits and Sovereign Gold Bond Scheme is based on investing money. Both end objectives are to get equivalent gold or equivalent money in terms of gold on maturity. If you would like to achieve the end objective and looking to choose one of these options, Sovereign Gold Bond Scheme would look at one of the best investment options.
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SBI Revamped Gold Deposit Scheme Vs Sovereign Gold Bonds – Which is better