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BoI’s galloping business in SGBs

Bank of India is a key player in the RBI’s Sovereign Gold Bonds:

The Reserve Bank of India has been issuing Sovereign Gold Bonds (SGBs) in 6 tranches from May 2021 to September 2021 to be sold through scheduled commercial banks. These bonds, guaranteed by the Government of India, have emerged as a veritable investment option for investors.

Secured, Unique Benefits

Conventionally, gold is one of the best modes of investment with secured returns. D.S. Shekhawat, General Manager, Government Business Department at Bank of India, says the bonds bear interest at the rate of 2.5% (fixed rate) per annum on the amount of initial investment. He adds that in fact, the benefits of sovereign gold bonds are many. The quantity of gold for which the investor pays is protected. “Investors get the ongoing market price at the time of redemption or premature redemption. Investors are assured of the market value of gold at the time of maturity and periodical interest,” he elaborates

Digitized, Tradable

Prices at which these bonds are transacted depend on the prevailing gold prices, as well as its corresponding demand and supply in the stock market. The bonds are issued by RBI on behalf of the Government of India and are government securities denominated in grams of gold. Says Shekhawat: “They are substitutes for holding physical gold. The sovereign gold bonds can be traded in the secondary market after 14 days from an initial subscription date, subject to a notice published by the RBI. Consequently, for transactions in the stock market, the holding certificate has to be digitized and stored in a demat account of an investor.”

Social Media: Leads, Queries

The IT team at Bank of India has designed an online application system in its internet banking module and the bank gives a discount of Rs50 per gram. The support system of the bank is also very robust giving hand holding to the branches, if there are any technical glitches. “We have utilized the digital platform to promote the sovereign gold bond via social media platforms like Facebook and Twitter giving huge visibility and vital picture to the target audience. Through social media, we get new leads and queries for investment, which is transferred to the branch nearest to the customers,” says Shekhawat.

The bank also informs the customers about the new tranches via SMS to their registered mobile numbers. Shekhawat says through all these digital modes, and follow-up by the teams in zonal offices and branches, the bank is able to achieve the desired number of applications.

Shining Performance

Under the direction of M. Karthikeyan, Executive Director, Government Business Department, the bank has been able to garner more than combined business in the last 3 tranches. Shekhawat says the bank has started the current financial year with a bang by selling 54.04 kg, 51.375 kg and 70.316 kg of gold bonds in the 3 respective series. The volume of gold units sold so far in the current FY is so far the best performance by the bank and it had started 2020-21 by selling 6082 gm in April and ended the FY with a sale of 26,912 gm in March 2021. It sold 10,851 gm of gold units of SGB 2019-20 for the issue between 7 and 18th June 2019. Subsequently it sold 11,204 gm and 19,791 gm for the 30th tranche in 2019-20. In a number of other series in 2019-20 and the last FY, it has been able to sell total 82,982 additional gm of gold units.

Till date, 68 tons of gold in bonds, amounting to Rs282 billion, have been issued since the inception of the sovereign gold bond scheme in November 2015. As per RBI’s Annual Report 2019-20, a total of Rs96.52 billion (30.98 tons) had been raised through the scheme.

The bank has a vast network of 5000+ branches in the country, which are activated to sell gold bonds. Along with getting new customers, the marketing team extend its support to the branches for increasing application numbers.

Shekhawat elaborates: “I have a dedicated marketing team in government business department at New Delhi, which works on a campaign mode for successful implementation of all government schemes including sovereign gold bonds. Our team of 500+ marketing executives plays a major role in promoting these products.”

50% Growth Targeted 

Investors in general are buying these bonds. There are customers who have bought them as an alternative to physical gold or just as a pure investment to be held till maturity. Shekhawat maintains that the business of gold bonds, being a good source of commission income of the bank, is expected to have a yearly growth of 50%.

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