353% return on SGB premature redemption date: Gold bond turns Rs 1 lakh investment into Rs 4.53 lakh

The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bond SGB 2019-20 Series-III-Issue date August 14, 2019. According to a statement from the Central Bank, investors will have the option to redeem this SGB tranche prematurely from February 13, 2026 (February 14 being a holiday). The premature redemption of the SGB series will be permitted after the fifth year from the date of issue of such gold bonds on the date on which interest is payable, as per the RBI statement.

How is SGB redemption price 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 the rule.

What is the premature redemption price for SGB 2018-19 Series-VI?

The premature redemption price due on February 12, 2026, has been fixed at Rs 15,641 per unit of SGB, based on the simple average of the closing price of gold for the last three business days, i.e., February 10, February 11, and February 12, 2026.

Also read: Gold bond delivers 377% return on premature redemption: Check SGB price, premature exit date and how to redeem

The SGB 2018-19 Series-VI was issued at Rs 3,449 per gram for online bonds. It will yield an absolute simple return of nearly 354% on the date of premature redemption.

The absolute return comes to be Rs 15,641 -Rs 3,449= Rs 12,192 (without factoring in the interest). In percentage terms, it is 12,192 ÷ 3,449×100 = 353.49%.

A nearly 354% 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 4.54 lakh. This amount doesn’t include a 2.5% annual interest gold bond holders get on the principal investment amount.

For investors who bought SGBs of the same series offline, the issue price was Rs 3,549 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 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 Reserve Bank of India (RBI) on behalf of the Government of India.

What are the minimum and maximum limits for SGB investment?

Sovereign gold bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the bonds shall be 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 and how will the interest be paid?

The bonds bear interest at the rate of 2.50 per cent (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 the customers be issued a Holding Certificate?

The customers will be issued Certificate of Holding on the date of issuance of the SGB. 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.