The RBI has announced the redemption price for sovereign gold bond (SGB) Series VI of 2018-19 due on February 12, 2024. The premature redemption rate for the same is ₹6,263 per unit, offering a profit of ₹2,937 per unit, a substantial increase of nearly 88% above the issue price of ₹3,326 per unit.
Insight: Sovereign gold bonds are an attractive investment option for those looking to invest in gold without having to worry about storage and security concerns. The SGB Series VI of 2018-19 has proven to be a profitable investment for those who are looking to make an early exit from the bonds.
The redemption price of SGB is calculated based on the simple average of the closing gold price of 999 purity of the previous three business days from the date of redemption as published by the India Bullion and Jewellers Association (IBJA). This ensures that the redemption price is reflective of the current market value of gold.
SGBs are government-issued securities that are denominated in gold and provide investors with a holding certificate. While the tenor of the bond is 8 years, early encashment or redemption is allowed after the fifth year from the date of issue on coupon payment dates.
In case of premature redemption, investors can approach the concerned bank/SHCIL offices/post office/agent 30 days before the coupon payment date. The request for premature redemption should be made at least one day before the coupon payment date and the proceeds are then credited to the customer’s bank account provided at the time of applying for the bond.
On maturity, the bonds are redeemed in rupees based on the simple average of the closing price of gold of 999 purity of the previous three business days from the date of repayment, published by the India Bullion and Jewelers Association Limited. Investors are advised one month before maturity regarding the ensuing maturity of the bond and the maturity proceeds are then credited to the bank account as per the details on record.
Additional Insight: The option for premature withdrawal of SGBs provides flexibility to investors who may need to access their funds earlier than the maturity date. This feature makes SGBs an attractive option for investors looking for a combination of stability (as a government-issued security) and liquidity. This makes SGBs a unique investment option, especially for those who are interested in the long-term benefits of investing in gold.
