The premature redemption of the SGB series is 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 statement from the RBI.
How is the gold bond series’ (SGB) redemption price calculated?
The gold bond series’ 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, the RBI statement further said.
What is the premature redemption price for SGB 2021-22 Series V – Issue date August 17, 2021?
The premature redemption price due on August 17, 2026, has been fixed at Rs 15,295 per unit of SGB, based on the simple average of the closing price of gold for the last three business days, i.e., August 12, August 13 and August 14, 2026.
The SGB 2021-22 Series V was issued at Rs 4,740 per gram for online bonds. It will yield an absolute simple return of nearly 223% on the date of premature redemption.
The absolute return is Rs 15,295 – Rs 4,740 = Rs 10,555. (without factoring in the interest). In percentage terms, it is Rs 10,555÷ Rs 4,740 × 100 = 222.68%.
A nearly 223% absolute return means that an investment of Rs 1 lakh in this SGB series at the time of its launch in August 2021 would be nearly Rs 3.23 lakh today, excluding the interest earned on the principal.
For investors who bought SGBs of the same series offline, the issue price was Rs 4,790 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, and the bonds will be redeemed and paid back to investors on maturity. The gold bond is issued by the RBI on behalf of the Government of India.
What are the minimum and maximum SGB investment limits?
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 SGB investors get 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.
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