312% return on SGB premature redemption date: Gold bond turns Rs 1 lakh investment into Rs 4.12 lakh

The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bond SGB 2019-20 Series-IV due on March 17, 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 a Reserve Bank of India statement.

Is there any new SGB series issuance?

No, there has been no issuance of a new Sovereign Gold Bond series in the recent past. The government has not announced any new tranche of SGBs in 2025 or 2026.

The last tranche of an SGB series - SGB 2023-24 Series IV - was issued in February 2024.

How is SGB redemption price calculated?

The redemption price 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.

What is the premature redemption price for SGB 2019-20 Series-IV?

The premature redemption price due on March 17, 2026, has been fixed at Rs 15,814 per unit of SGB, based on the simple average of the closing price of gold for the last three business days, i.e, March 12, March 13 and March 16, 2026.The SGB 2019-10 Series-IV was issued at Rs 3,890 per gram. For investors applying online, the price of the bond was Rs 3,840 per gram. It will yield an absolute simple return of nearly 312% on the date of premature redemption for bonds purchased online.

The absolute return comes to be Rs 15,814-Rs 3,840= Rs 11,974 (without factoring in the interest). In percentage terms, it is 11,974 ÷ 3,840×100 = 311.8%.

A nearly 312% 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 4.12 lakh. This amount doesn’t include a 2.5% annual interest gold bond holders get on the principal investment amount.

Important FAQs on SGBs, as per the RBI website

What is a Sovereign Gold Bond (SGB)? Which authority 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 will be redeemed in cash on maturity. The gold bond series is issued by the RBI on behalf of the Government of India.

What is the rate of interest SGB holders get 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 will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.

When will SGB customers be issued a certificate of holding?

SGB customers will be 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 an email, if an email address is provided in the application form.