The Reserve Bank of India (RBI) on March 22, 2024, announced that final redemption of Sovereign Gold Bonds 2016 Series II will be allowed from March 28, 2024. The final redemption of these SGBs can be after eight years. The final redemption price has been set at Rs 6,601 per unit of SGB. This price is determined based on the simple average of the closing gold price for the week preceding the redemption date, as published by the India Bullion and Jewellers Association Ltd (IBJA).
Further, in another release, the central bank announced the premature redemption of SGB 2016-17 Series II, which is due on March 30, 2024. This series was issued on September 30, 2016, and is nearing its final redemption. 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 redemption price for the premature redemption is also Rs 6,601.
On March 29, 2016, SGB 2016 Series II was issued for Rs 2,916 per gram or unit. This SGB is now reaching its maturity next week. If an investor had bought 5 grams of gold when the SGB was issued, his investment would have totalled totalling Rs 14,580 (5 grams * Rs 2,916). At redemption now, with gold priced at Rs 6,601 per gram, the total return amounts to Rs 33,005. Note that this is in addition to half yearly interest of 2.50 per cent an investor got so far. The SGBs carry a fixed rate of 2.50 per cent per annum, which will be paid semi-annually, and the final interest payment will be made along with the principal upon maturity
So, the investor who bought 5 grams of SGB made around 126.39 per cent return on it from 2016 to 2024. The Compound growth annual rate of this investment stands at 10.75 per cent. Further, upon maturity, these bonds incur no tax on redemption. The minimum investment in SGB is one gram, while the maximum subscription limit is 4 kg for individuals.
