The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bond (SGB) 2019-20 Series V, which was issued on October 15, 2019. According to the central bank, investors in this tranche will be eligible to opt for premature redemption from April 15.
Investors in Sovereign Gold Bond (SGB) 2019-20 Series V are set to earn strong returns on premature redemption, with gains of around 28.44% CAGR and nearly 302% absolute growth over nearly 5.5 years.
The central bank has fixed the premature redemption price at Rs 15,009 per unit, payable on April 15. The bonds were issued in October 2019 at Rs 3,738 per gram for online bonds.
The absolute gain works out to Rs 15,009 – Rs 3,738 = Rs 11,271, excluding the interest component. In percentage terms, this works out to a return of 301.53%.
Based on the issue price and redemption value, investors are looking at an absolute gain of about 302%, translating into an annualised return of about 28.44% over 5.5 years.
In simple terms, an investment of Rs 1 lakh in this tranche would now be worth around Rs 4 lakh, excluding interest income.
Additional 2.5% Annual Interest Benefit
Apart from capital gains, SGB investors also received a fixed 2.5% annual interest, paid semi-annually. This interest is over and above the price appreciation, further increasing overall returns.
As per the RBI, premature redemption of Sovereign Gold Bonds is allowed after the fifth year from the date of issue and only on interest payment dates. For this tranche, April 15, 2026, is the eligible redemption date, offering investors an exit window before maturity.
ALSO READ: Gold ETFs Attract Over Rs 31,-000 Crore In March Quarter Amid Geopolitical Tensions
How Redemption Price Is Worked Out
The redemption price isn’t fixed at random. It is calculated by taking the simple average of 999 purity gold prices published by the India Bullion and Jewellers Association (IBJA), based on the last three working days before the redemption date.
As such, the premature redemption price of Rs 15,009 per unit, due on April 15, 2026, has been calculated based on the simple average of the closing gold prices over the last three business days: April 9, April 10 and April 13.
What This Means For Investors
This tranche shows how Sovereign Gold Bonds can deliver strong long-term gains linked to gold prices, while also offering a steady 2.5% annual interest, something physical gold does not provide. For investors deciding whether to exit early or stay on till maturity, the choice will depend on their view on gold prices, tax considerations and personal financial goals.
ALSO READ: Gold ETF Inflows Drop In March As Iran War Hit Bullion Bulls
Essential Business Intelligence,
Continuous LIVE TV,
Sharp Market Insights,
Practical Personal Finance Advice and
Latest Stories — On NDTV Profit.
Leave a comment