The scheduled date for premature redemption of Sovereign Gold Bond (SGB) Scheme 2017-18 Series I, issued on May 12, 2017, will be November 10, 2023, as November 12, 2023 happens to be Diwali, a non-working day.
Investors can redeem their SGBs prematurely after the fifth year from the date of issue, coinciding with the interest payment date. By that account, the redemption date for this series (SGB 2017-18 Series I) was November 12, 2023. But as both November 11 and November 12 happen to be non-working days (Saturday and Diwali), the redemption date has been brought forward to November 10, 2023, the RBI announced in a release.
The redemption value of SGBs is determined by calculating the simple average of the closing gold price with 999 purity over the week (Monday to Friday) preceding the redemption date. This average is published by the India Bullion and Jewellers Association Ltd (IBJA).
Consequently, the redemption value for the premature redemption of SGB Series 2017-18 Series I scheduled for November 10, 2023, will be Rs 6,116 per unit of SGB. This value is based on the simple average of closing gold prices during the week from October 30 to November 3, 2023.
SGBs are government-backed investment instruments representing a specific quantity of gold. These bonds are issued by RBI on behalf of the Government of India and are denominated in grams of gold. The minimum investment in SGBs is one gram, with a maximum limit of four kilograms for individuals and Hindu Undivided Families (HUFs) and 20 kilograms for trusts and similar entities per fiscal year.
SGBs provide a convenient and safe way to invest in gold without the need to purchase and store physical gold. They are considered low-risk investments due to their government backing.
These bonds are issued periodically throughout the year, with investors able to subscribe through commercial banks, select post offices, and stock exchanges. The issue price is determined based on the average closing price of 999 purity gold for the three working days before the subscription date.
SGBs have an eight-year tenure, but investors have the option to exit after five years. They earn interest at a rate of 2.50 per cent per annum on the initial investment, paid out semi-annually.
Upon maturity, investors can redeem their SGBs for cash or physical gold, with the redemption value based on the average closing price of 999 purity gold for the three working days before the redemption date.
The advantages of investing in SGBs include their safety, convenience, liquidity, and the interest earned on the investment. As they are backed by sovereign guarantee provided by the Government of India, the risk of default is practically nil.
To invest in SGBs, one must select a financial institution, fill out an application form available at the chosen institution, make the required payment in cash or by cheque, and receive a certificate from RBI confirming the investment made.