392% return on SGB premature redemption date: Gold bond turns Rs 1 lakh investment into Rs 4.92 lakh

The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bond SGB 2018-19 Series-II-Issue date October 23, 2018. According to a statement from the central bank, investors will have the option to redeem the SGB tranche prematurely from April 23, 2026.

The premature redemption of the SGB series will be permitted after five years from the issue date of the gold bonds, specifically on the date when interest is payable, as stated by the RBI.

How will the SGB redemption price for premature redemption be calculated?


The redemption value will be calculated using the simple average closing price of the gold with 999 purity, as published by the India Bullion and Jewellers Association (IBJA) for the preceding three working days, according to the Central Bank guidelines.

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What is the premature redemption price for SGB Series-II-Issue date October 23, 2018?

The early redemption price due on April 23, 2026, has been fixed at Rs 15,219 per unit of SGB, based on the simple average of the closing price of gold for the three business days, i.e, April 20, April 21 and April 22, 2026.

The SGB 2020-21 Series-VII V was issued at Rs 3,096 per gram for online subscriptions. It will yield an absolute simple return of nearly 392% on the date of the premature redemption.

For investors who bought SGBs of the same series offline, the issue price was Rs 3,146 per gram of gold. A Rs 50 discount was available on the online purchase of the SGB.

The absolute return comes at Rs 15,219 -3,096 = Rs 12,123 (without factoring in the interest of 2.5%). In percentage terms, it is 15,219 ÷ 3,096 ×100 = 392%.

A 392% return means that if a person invested Rs 1 lakh in this SGB series at the time of its issuance in 2018, the value of that investment would be about Rs 4.92 lakh, as per the declared redemption price. This amount doesn’t include the 2.5% annual interest that gold bond holders get on the principal investment amount.

SGB calculation

• Investment: Rs 1,00,000
• Return: 392%
• Gain: Rs 3,92,000
• Total value = Rs 4,92,000 (approx.)

What is a Sovereign Gold Bond (SGB)? Which agency issues it?

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds are redeemed in cash on maturity. The gold bond is issued by the RBI on behalf of the Government of India.

What are the minimum and maximum investment quantities of subscriptions in SGB?

The minimum investment in SGB is 1 gram for a client. There is a maximum buying limit of 4,000 grams (4 kg) for individual and the HUF investor category and 20,000 (2 kg) grams for Trust and similar entities notified by government per fiscal year (i.e., from the first day of April of any calendar year to the last day of March of the subsequent calendar year), or as may be otherwise specified by the GOI/RBI/NSEIL from time to time.

In case of joint holdings, the limit shall apply to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by the government as well as those purchased from the secondary market.

What is the rate of interest of SGB and how is the interest paid?

The bonds offer interest at the rate of 2.50% (fixed rate) per annum on the amount of the initial investment. Interest is credited semi-annually to the bank account of the investor and the last interest is payable on the maturity of the bond along with the principal.

When are SGB customers issued a certificate of holding?

SGB customers are issued a certificate of holding on the date of the issuance of the SGB. The certificate of holding can be collected from the issuing banks/SHCIL offices/post offices/designated stock exchanges/agents or obtained directly from the RBI on email, if an email address is provided in the application form.