The Reserve Bank of India (RBI) announced that premature redemption of the Sovereign Gold Bonds 2017-18 Series XIII will be allowed starting December 26, 2023. The opportunity to prematurely redeem these bonds issued in 2017-18, will start after the fifth year, coinciding with the interest payment date.
The redemption price has been set at Rs 6,249 per unit of SGB, based on the simple average of closing gold price between December 20-22, 2023, as published by the India Bullion and Jewellers Association Ltd (IBJA).
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.
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 are 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.