RBI Announces Premature Redemption Price for SGB 2019-20 Series VI
The Reserve Bank of India (RBI) has announced the early redemption (premature withdrawal) price for the Sovereign Gold Bond (SGB) 2019-20 Series VI, which was issued on October 30, 2019.
Investors will have the option to redeem these SGBs prematurely on October 30, 2025. The tenor of the SGB is 8 years but the premature redemption of the bond is allowed after the fifth year from the date of issue.
Subscription for the 2020-21 Series-VII issue was available from October 21 to 25, 2019, with the bonds issued on October 30, 2019.
What do you mean by the premature redemption price of SGB 2019-20 Series-VI?
The early redemption price for the Sovereign Gold Bonds due on October 30, 2025, has been set at Rs. 11,992 per unit. This price is based on the average closing price of gold over the three working days of October 27, 28, and 29, 2025.
The SGB 2019-20 Series-VI was sold at Rs.3,835 per gram. Investors who applied online and paid digitally received an Rs. 50 discount, making their issue price Rs. 3,785 per gram.
For investors who purchased the bonds online, the premature redemption on October 30, 2025, will provide an absolutely simple return of around 217% (excluding interest).
This means the value of the bond has increased from Rs. 3,785 to Rs. 11,992 a gain of Rs. 8,207 per gram. In percentage terms, this works out to (Rs. 8,207 ÷ Rs. 3,785) × 100 = 216.82%.
Premature redemption date for SGB 2019-20 Series-VI
The RBI has announced that, according to the Government of India’s notification dated September 30, 2019, investors can redeem (cash in) their Sovereign Gold Bonds after five years from the date they were issued, but only on the interest payment dates. Since this particular issue of the bonds was dated October 30, 2019, the next date when investors can redeem them early will be October 30, 2025.
Guidelines for Premature Redemption of SGBs
Investors should review the redemption schedule for their Sovereign Gold Bonds carefully to avoid missing important deadlines. Some major actions include:
a) Identify Your Tranche:
Check the issue date and series name of your SGBs to determine which tranche they belong to. This information is available in the holding statement, the RBI’s notification, or through your depository/bank.
b) Submit Premature Redemption Requests on Time:
If you wish to redeem before maturity (after the 5th year, on interest payment dates), ensure that your redemption request is lodged before the deadline mentioned in the RBI or bank schedule. Requests after the cutoff date will be processed only in the next eligible window.
SGB Interest Rate
The interest on Sovereign Gold Bonds (SGBs) grows from the date of issue of the series and is paid at a fixed rate of 2.5% per annum on the nominal value of the bond. The interest is disbursed semiannually, with the final interest payment made along with the principal at maturity.
What should investors be aware of before buying SGBs?
There is a risk of capital loss if the market price of gold declines. However, investors do not lose in terms of the actual quantity of gold they have effectively purchased, as clarified in the FAQs on the RBI website.
