The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bond (SGB) 2020-21 Series VIII, which was originally issued on November 18, 2020. Investors holding this tranche will be able to redeem their bonds early starting Monday, May 18, 2026, as per an RBI notification. Sovereign Gold Bonds (SGBs) come with an 8-year maturity tenure, but the Reserve Bank of India (RBI) allows early redemption of SGBs after the completion of 5 years of the issue date of the tranche. This early exit option can only be exercised on specific coupon (interest) payment dates.
ET Wealth Online tells you the premature redemption price, the returns you will get if you opt for premature redemption and other key details about the SGB 2020-21 Series VIII.
What is the redemption price of SGB 2020-21 Series VIII?
The redemption price for this SGB tranche has been set at Rs 16,012 per unit. When the bonds were issued in November 2020, online investors who applied digitally got them at a discounted price of Rs 5,127 per gram, while offline subscribers had purchased them at Rs 5,177 per gram.
The premature redemption price for the SGB series due on May 18, 2026, has been fixed based on the simple average of the closing price of gold for the last three business days, i.e, May 13, May 14 and May 15, 2026.
May 13 Fine Gold (999) – Rs 16,098
May 14 Fine Gold (999) – Rs 16,116
May 15 Fine Gold (999) – Rs 15,821
The average of the three Fine Gold (999) rates is Rs 16,011.67 per gram.
The Sovereign Gold Bond (SGB) 2020-21 Series VIII was issued at Rs 5,127 per gram for investors who applied online, while offline subscribers bought it at Rs 5,177 per gram. With the premature redemption price now fixed at Rs 16,012 per unit, online investors are set to earn an absolute return of 212.30%, excluding the interest earned on the bond.
In absolute terms, the gain works out to Rs 10,885 per gram (Rs 16,012-Rs 5,127). This translates into a return of 212.30% over the original investment amount. Investment of Rs 1 lakh in this SGB tranche would have grown to nearly Rs 3.12 lakh, generating a profit of about Rs 2.12 lakh in today’s date, excluding the interest income.
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 is the rate of interest SGBs provide to their investors and how is it 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 amount.
