The Reserve Bank of India (RBI) announced the premature redemption of Sovereign Gold Bond (SGB) Series I of 2016-17, today on February 5, 2024. The Series I of SGB 2016-17 was issued on August 5, 2016. As per RBI guidelines, premature redemption of the Gold Bond can be done after the completion of the fifth year from the date of issuance, aligning with the interest payment date. The next due date for the premature redemption of this tranche is today, February 05, 2024.
The redemption price for the premature redemption is Rs 6,271 determined based on the simple average of the closing gold price of 999 purity during the week (Monday-Friday) preceding the redemption date.
These SGBs issued on December 23, 2017, are scheduled to mature eight years from the date of their issue. The SGBs carry a fixed rate of 2.50 per cent per annum. The interest will be paid semi-annually, and the final interest payment will be made along with the principal upon maturity. Meanwhile, RBI will issue the final tranche of Sovereign Gold Bonds (SGBs) for the 2023-24 series, the SGB 2023-24 Series IV on February 12, 2023, and it will close subscription on February 16, 2023.
Investing in Sovereign Gold Bonds (SGBs) is better than investing in physical gold due to exemptions from making charges, storage expenses, and purity concerns. Further, upon maturity, these bonds incur no tax on redemption. Though they have lower liquidity than the yellow metal, SGBs can be traded on stock exchanges within a fortnight of their issuance.
The minimum investment in SGBs is one gram, while the maximum subscription limit is 4 kg for individuals.
The historical appreciation of gold prices has been lucrative for investors in recent years. Notably, the SGB 2015 Series I, which was the first SGB issued in India, recently allowed redemption by November end, yielding annual returns of 12.9 per cent. The yellow metal has averaged 11.2 per cent returns in the last 20 years, according to a small case report.
But investors should be aware that, SGBs are not immune to market forces and can experience fluctuations, especially during periods of inflation or global economic uncertainty. Critics point out that gold had lost 83 per cent of its international purchasing power between 1980 and 2001, and has not yet reached inflation-adjusted price 43 years later and it just fared better in Rupees due to currency depreciation and import duties. Nevertheless, SGB still remains the most tax-efficient gold investment.