Now Reading: SGB investors earn 192% as RBI fixes redemption at Rs 14,614
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SGB investors earn 192% as RBI fixes redemption at Rs 14,614
The Story in Brief
Investors in Sovereign Gold Bonds (SGBs) 2020-21 Series VII can opt for premature redemption on Monday, 19 October, at about Rs 14,614 per unit, as fixed by the Reserve Bank of India (RBI). The redemption price represents an absolute return of about 192 per cent on the original investment, excluding interest.
The bonds were issued on 20 October 2020 at Rs 5,001 per gram for online subscribers. An investment of Rs 1 lakh would now be worth about Rs 2.92 lakh, excluding interest earned during the holding period. The redemption was scheduled for 19 October because 20 October 2026 is a holiday.
SGBs carry a fixed interest rate of 2.5 per cent per annum on the initial investment, paid half-yearly. The bonds have an eight-year tenure but investors can seek premature redemption after five years from the issue date. The 192 per cent return applies to this specific tranche and excludes interest and taxes.
Indian Opinion Analysis
The 192 per cent absolute return on this SGB tranche reflects gold price appreciation since October 2020, not annualised performance. Investors must add the 2.5 per cent annual interest separately to gauge total returns. The RBI fixes the redemption price based on a three-day average of IBJA gold prices, so returns vary across tranches depending on issue price and redemption date. The premature redemption window is available only on eligible interest payment dates after five years. Investors should also consider tax treatment before exiting. Those who hold to maturity or sell on exchanges may get a different amount.
Source: business-standard.com
This brief was synthesised by AI from the source linked above. Methodology and corrections.
