Mumbai: The Reserve Bank of India (RBI) has announced a premature redemption price of Rs 15,310 per unit for Sovereign Gold Bond (SGB) 2019-20 Series III, giving eligible investors an option to redeem their bonds from August 14, 2026.
The SGB tranche was originally issued on August 14, 2019, at an issue price of Rs 3,449 per gram for investors who applied online. The latest redemption price is more than four times the original issue price.
343.9% gain in seven years
At Rs 15,310 per unit, investors stand to make an absolute capital gain of Rs 11,861 per unit, equivalent to approximately 343.9% over the original investment, excluding the interest earned during the holding period.
For example, an investment of Rs 1 lakh at the original online issue price would represent approximately 28.99 units. At the current premature redemption price, those units would be worth around Rs 4.44 lakh.
This translates into a capital appreciation of approximately Rs 3.44 lakh, before taking into account the interest received over the investment period. Based solely on the increase in the redemption value, the annualised return works out to around 23.7% over seven years.
How RBI calculated the redemption price
The RBI said the redemption price is based on the simple average of the closing prices of 999-purity gold for the three business days preceding the redemption date.
For the August 14, 2026 redemption, the relevant dates were August 11, 12 and 13, with gold prices published by the India Bullion and Jewellers Association (IBJA) used for the calculation.
Investors also earned 2.5% annual interest
Apart from the increase in the value of gold, SGB investors received fixed interest of 2.5% per annum on the original investment. The interest is paid twice a year and is separate from the capital appreciation linked to gold prices.
Under the SGB framework, the bonds have an eight-year maturity, while premature redemption is permitted after completion of the fifth year from the date of issue, subject to redemption being made on an interest payment date.
Investors who purchased the 2019-20 Series III bonds were informed about the premature redemption facility as part of the terms and conditions applicable at the time of issue.
