The Reserve Bank of India (RBI) yesterday announced the premature redemption of Sovereign Gold Bond 2017-18 Series III. Sovereign Gold Bond 2017-18 Series III was issued on October 16, 2017, and RBI allows premature redemption of these bonds can be done after five years, aligning with the interest payment date. Accordingly, the due date for this tranche is today, April 16, 2024. The redemption price for the premature redemption is Rs 7,260 per unit of SGB based on the simple average of closing gold price for three business days i.e. April 10, 12 and 15, 2024.
These SGBs will mature after 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.
Investing in Sovereign Gold Bonds (SGBs) can offer advantages vis-a-vis investing in physical gold due to exemptions from making charges, storage expenses, and the absence of purity concerns. Also, upon maturity, these bonds incur no tax on redemption. Though they are lower in liquidity when compared to physical gold, SGBs can be traded on stock exchanges within a fortnight of their issuance.
The minimum investment in Sovereign Gold Bonds for individuals is one gram, while the maximum subscription allowed is 4 kg.
Investors have seen profitable returns in recent years due to the historical appreciation of gold prices. The first Sovereign Gold Bond (SGB) issued in India, the SGB 2015 Series I, was redeemed by the end of November and offered annual returns of 12.9 per cent. The returns of the last year show gold faring with 11.71 per cent return, if we take five years' returns it is 14.57 per cent. However, read more to know how it fares against other fixed-income options.
But investors should be aware that, SGBs like any form of gold are not immune to market forces and can be volatile, especially during periods of inflation or global economic uncertainty. But it has the potential to act as a safeguard against inflation, acting as a hedge against inflation. It had outperformed the Nifty 50 during high inflation periods. Nevertheless, critics point out the long time gold takes to regain lost value, and it lost 83 per cent of its international purchasing power between 1980 and 2001. After 43 years it has not yet reached inflation-adjusted price but fares better in Rupees due to currency depreciation and import duties.
