The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bond (SGB) 2021-22 Series-III - Issue date June 8, 2021. According to a statement from the Central Bank, investors will have the option to redeem this SGB tranche prematurely from June 8, 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 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 an RBI rule.
What is the premature redemption price for SGB 2021-22 Series-III?
The premature redemption price of the SGB 2021-22 Series-III due on June 8, 2026, has been fixed at Rs 15,512 per unit of SGB, based on the simple average of the closing price of gold for the last three business days, i.e., June 3, June 4, and June 5, 2026.
The SGB 2021-22 Series-III was issued at Rs 4,839 per gram for online bonds. It will yield an absolute simple return of 220% on the date of premature redemption.
Absolute return (gain) = Final value - initial investment
= Rs 15,512 – Rs 4,839
= Rs 10,673
If you want the absolute return percentage:
Absolute Return (%)=10,673/4,839×100
= 220.56% (approx.) without interest credit
If someone had invested Rs 1 lakh at the time of the issue of the gold, it will yield an absolute return of 220.56%, which means:
Gain = Rs 1,00,000 × 220.56%
= Rs 1,00,000 × 2.20
= Rs 2,20,060
Total value of investment = Rs 1,00,000 + Rs 3,20,060
= Rs 3,20,060
So, Rs 1 lakh would grow to approximately Rs 3.20 lakh at a return of 220.56%. (without considering interest part)
For investors who bought SGBs of the same series offline, the issue price was Rs 4,889 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 are Sovereign Gold Bonds (SGBs) series? 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 is the rate of interest 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 the investor and the last interest is payable on maturity along with the principal.
When will a customer be issued a certificate of holding?
A customer is issued a certificate of holding on the date of the issuance of an SGB series. 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 the email address is provided in the application form.
