RBI fixes price at Rs 12,198 per unit for redemption of gold bonds in nearly 3-fold surge

Mumbai, Oct 28 (IANS) The Reserve Bank of India (RBI) has announced a price of Rs 12,198 per unit for the premature redemption of the Sovereign Gold Bond (SGB) 2020-21 Series-I date October 28, 2020. Investors will receive the option to redeem the SGB tranche prematurely from Tuesday, according to an RBI statement.

The RBI further stated that the redemption price has been calculated using the simple average closing price of gold at 999 purity as published by the India Bullion and Jewellers Association (IBJA).

Based on this estimate, the Reserve Bank has announced that the premature redemption price for the Sovereign Gold Bond (SGB) 2020-21 Series-I, due on October 28, 2025, will be Rs 12,198 per unit. This price is based on the simple average of the closing prices of gold over three business days of October 23, 24, and 27.

When this series was first issued, investors who applied online paid Rs 4,589 per gram, while those who bought offline paid Rs 4,639 per gram.

At the current redemption value, the price has jumped nearly three-fold over the five-year period. In addition, investors holding these bonds have earned an annual interest over the five-year period.

At the current redemption value, the bonds will deliver an absolute return of nearly 166 per cent for online investors.

The RBI has also clarified that the premature redemption of the SGB series will be permitted after the fifth year from the date of issue of such gold bonds on the date on which interest is payable.

The SGB Scheme was introduced by the Indian government in November, 2025 as an alternative form of investing in gold, The bonds were issued by the RBI on behalf of the Centre. The bonds denominated in grams of gold offered investors a fixed annual interest of 2.5 per cent on the issue price and returns due to the appreciation in gold prices.

The scheme was mainly aimed at reducing imports of gold that was leading to an outgo of precious foreign exchange that was leading to a wider current account deficit. Besides, the bonds help to channel household savings into financial assets.

The bonds have a fixed term of eight years, but investors have the choice of exiting after five years on the date on which the interest is payable. SGBs can also be traded on stock exchanges, transferred to others, or used as collateral for raining loans from banks.

–IANS

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