Investors who bought Sovereign Gold Bond (SGB) 2019-20 Series-X are sitting on massive gains. The Reserve Bank of India (RBI) has fixed the premature redemption price of this tranche at Rs 15,920 per unit, translating into an absolute return of about 278% over the issue price for online subscribers.
RBI announces premature redemption price
The RBI has announced the premature redemption price for Sovereign Gold Bond (SGB) 2019-20 Series-X, which was issued on March 11, 2020.
According to an RBI statement, investors in this tranche will have the option to redeem their bonds prematurely on March 11, 2026, as the scheme allows early redemption after the fifth year from the date of issue, on the interest payment date.
“Premature redemption of Gold Bond may be permitted after fifth year from the date of issue of such Gold Bond on the date on which interest is payable. Accordingly, the next due date of premature redemption of the above tranche shall be on March 11, 2026,” the RBI said in a circular.
Premature redemption price fixed at Rs 15,920
The RBI has fixed the premature redemption price at Rs 15,920 per unit of SGB.
This price is calculated based on the simple average of the closing price of 999 purity gold for the last three business days — March 6, March 9 and March 10, 2026, as published by the India Bullion and Jewellers Association (IBJA).
Issue price of SGB 2019-20 Series-X
The SGB 2019-20 Series-X was open for subscription from March 2 to March 6, 2020, and the bonds were issued on March 11, 2020.
The issue price was – Rs 4,260 per gram for offline investors, and Rs 4,210 per gram for investors who applied online and paid digitally.
How much investors gained
For investors who bought the bonds online at Rs 4,210 per unit, the premature redemption price of Rs 15,920 translates into a large capital gain.
Calculation of absolute return:
Issue price: Rs 4,210
Redemption price: Rs 15,920
Total gain: Rs 11,710 per unit
In percentage terms:
Rs 11,710 ÷ Rs 4,210 × 100 = about 278.15% absolute return
This gain is only from the rise in gold price and does not include the interest income earned during the holding period.
Investors also earned annual interest
Apart from the capital appreciation linked to gold prices, SGB investors also earn fixed interest of 2.5% per annum on the nominal value of the bond.
As per the scheme rules:
Interest starts from the date of issue
It is paid twice a year (half-yearly)
The last interest payment is made along with the redemption amount
Sovereign Gold Bonds have a maturity period of eight years, but investors are allowed to exit early. Under the scheme rules, premature redemption is allowed after five years and it can be exercised only on interest payment dates.
The redemption amount is paid in Indian rupees, and the price is determined using the average gold price of the previous three working days, as published by the IBJA, according to the RBI.
Strong returns highlight gold’s long-term performance
The sharp rise in gold prices over the past few years has significantly boosted returns for SGB investors. The 278% absolute return for this tranche highlights how long-term exposure to gold through SGBs can generate substantial gains while also providing fixed interest income.
For many investors, SGBs have proven to be an attractive way to invest in gold without the need to buy or store physical metal.
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