The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bond SGB 2020-21 Series-XI-Issue date February 09, 2021). According to a statement from the Central Bank, investors will have the option to redeem this SGB tranche prematurely from August 7, 2026 (August 8 and August 9 being holidays). The premature redemption of the SGB series will be permitted after the fifth year from the date of the issue of such gold bonds on the date on which interest is payable, as per the RBI statement.
How is the SGB redemption price calculated?
The redemption value is calculated based on the simple average closing price of the gold of 999 purity published by the India Bullion and Jewellers Association (IBJA) for the preceding three working days, as per the rule.
What is the premature redemption price for SGB 2020-21 Series-XI?
The premature redemption price due on August 7, 2026, has been fixed at Rs 14,564 per unit of SGB, based on the simple average of the closing price of gold for the last three business days, i.e., August 4, August 5 and August 6, 2026.
The SGB 2020-21 Series-XI was issued at Rs 4,862 per gram for online bonds. It will yield an absolute simple return of nearly 200% on the date of premature redemption.
The absolute return comes to be Rs 14,564-Rs 4,862 = Rs 9,702 (without factoring in the interest). In percentage terms, it is (Rs 9,702 ÷ Rs 4,862) × 100 = 199.55%
A nearly 200% absolute return means that an investment of Rs 1 lakh in this SGB series at the time of its issuance in 2019 would now be worth around Rs 3 lakh, excluding the semi-annual interest earned on the bonds.
For investors who bought SGBs of the same series offline, the issue price was Rs 4,912 per gram of gold. A Rs 50 discount was available on the online purchase of these SGBs.
Important frequently asked questions (FAQs) on SGBs as per the RBI website
What is a Sovereign Gold Bond (SGB)? Who is the issuer?
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by the RBI on behalf of the Government of India.
What are the minimum and maximum limits for SGB investment?
Sovereign gold bonds are issued in denominations of one gram of gold and in multiples thereof. The minimum investment in the bonds is 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 from time to time per fiscal year (April–March). In case of joint holding, the limit applies to the first applicant.
What is the rate of interest and how will the interest be paid?
The bonds bear interest at the rate of 2.50% (fixed rate) per annum on the amount of the initial investment. Interest is credited semi-annually to the bank account of an investor and the last interest is payable on maturity along with the principal.
