Gold Backed Bonds in India come in two types with very different safety levels. RBI Gold Bonds carry a sovereign guarantee from the Government of India, so the credit risk is that of the government itself. Gold Loan Backed Bonds are NCDs issued by gold loan NBFCs, secured by physical gold pledged at branches and credit-rated AA- or higher for the big names. Both are generally safe, but the protection works in different ways.<\/p>\n\n\n\n
Picture this. Your father has just retired with \u20b915 lakh from his provident fund. A neighbour mentions Gold Loan Backed Bonds paying around 9.25%. The return looks attractive. But the next thought lands hard. Will the money be there at the end of five years? If the NBFC runs into trouble, who do you chase to get it back?<\/p>\n\n\n\n
That’s the right question to ask. Different types of gold bonds rest on different safety nets, and a clear-headed investor needs to know what is holding up their money. Here is how the safety equation works for each.<\/p>\n\n\n\n