The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bond SGB 2019-20 Series-V-Issue date October 15, 2019. According to a statement from the Central Bank, investors will have the option to redeem this SGB tranche prematurely from April 15, 2026.
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 will the SGB redemption price for premature redemption be calculated?
The redemption value will be 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 a Central Bank’s rule.
What is the premature redemption price for SGB 2019-20 Series-V?
The premature redemption price due on April 15, 2026, has been fixed at Rs 15,009 per unit of SGB, based on the simple average of the closing price of gold for the last three business days, i.e., April 9, April 10 and April 13, 2026.
The SGB 2019-20 Series-V was issued at Rs 3,738 per gram for online bonds. It will yield an absolute simple return of nearly 302% on the date of premature redemption.
The absolute return comes to be Rs 15,009 -Rs 3,738 = Rs 11,271 (without factoring in the interest). In percentage terms, it is 11,271 ÷ 3,738 x100 = 301.53%.
A nearly 302% return means if a person invested Rs 1 lakh in this SGB series at the time of its issuance in 2019, the value of that amount would be nearly Rs 4.02 lakh. This amount doesn’t include a 2.5% annual interest gold bond holders gon the principal investment amount.
For investors who bought SGBs of the same series offline, the issue price was Rs 3,788 per gram of gold. A Rs 50 discount was available on the online purchase of the SGB.
Important FAQs on SGBs as per RBI website
What is a Sovereign Gold Bond (SGB)? Which agency issues it?
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 are redeemed in cash on maturity. The gold bond is issued by the RBI on behalf of the Government of India.
What is the rate of interest of SGB and how is the interest 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 the investor and the last interest is payable on the maturity of the bond along with the principal.
When will SGB customers be issued a certificate of holding?
SGB customers are issued a certificate of holding on the date of the issuance of the SGB. The certificate of holding can be collected from the issuing banks/SHCIL offices/post offices/designated stock exchanges/agents or obtained directly from the RBI on email, if an email address is provided in the application form.
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