RBI Announces Premature Redemption Prices for Sovereign Gold Bonds 2019-20 and 2020-21

Synopsis

Sovereign Gold Bond: The Reserve Bank of India has revealed the redemption prices for select gold bond series, which can be redeemed prematurely after a five-year period from their issuance. The redemption amount is determined by taking a three-day average of gold prices.

The Reserve Bank of India (RBI) has announced the premature redemption price of Sovereign Gold Bonds 2019-20 Series IX and 2020-21 Series V, due today (Tuesday, August 11, 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 is the SGB redemption price calculated?

The redemption value of an SGB 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.

Sovereign Gold Bonds 2019-20 Series IX

Sovereign Gold Bond (SGB) 2019–20 Series IX was issued in 2020 with an issue price of Rs 4,020 per gram (Rs 4,070 per gram for offline applications).

What is the premature redemption price for SGB 2020-21

The premature redemption price due on August 11, 2026, has been fixed at Rs 14,957 per unit of SGB, based on the simple average of the closing price of gold for the last three business days, i.e., August 6, August 7 and August 10, 2026.

The absolute return comes to be Rs 14,957 -Rs 4,020 = Rs 10,937 (without factoring in the interest). In percentage terms, it is (Rs 10,937 ÷ Rs 4,020) × 100 = 272.06%

It means, a Rs 1 lakh invested in the gold bond at the time of its issue is now worth approximately Rs 3.72 lakh.

SGB 2020-21 Series-V-Issue

The Sovereign Gold Bond (SGB) 2020-21 (Series V was issued in July 2020 with an issue price of Rs 5284 per gram (Rs 5,334 per gram for offline applications).

The premature redemption price due on August 11, 2026, has been fixed at Rs 14,957 per unit of SGB, based on the simple average of the closing price of gold for the last three business days, i.e., August 6, August 7 and August 10, 2026.

The absolute return comes to be Rs 14,957 -Rs 5284 = Rs Rs 9,673 (without factoring in the interest). In percentage terms, it is (Rs 9,673 ÷ Rs 5,284) × 100 = 183.05%

It means, a Rs 1 lakh invested in the gold bond at the time of its issue is now worth approximately Rs 2.83 lakh lakh.

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 investments?

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 the 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 on SGB investments 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 an investor and the last interest is payable on maturity along with the principal. In the first year of its launch in the Financial Year 2015-16, gold bonds offered an interest of 2.75%.