The Reserve Bank of India (RBI) has declared the premature redemption rate for the Sovereign Gold Bond (SGB) 2020-21 Series VII. This development brings significant benefits for investors, as they can now achieve a return of nearly 153%. Investors who made a purchase in October 2020 can now achieve the meaning of their investment by redeeming 5 years afterward.
To What Extent of Profit Have Investors Acquired?
Per the RBI report, the premature redemption price of the SGB 2020-21 Series VII is ₹12,792 per gram. These bonds originated on October 20, 2020, for a price of ₹5,051 per gram. Therefore accumulating an approximate profit of ₹7,741 per gram, equivalent to a return of 153% on the initial price of the bond. This profit is remarkable. Not only does it surpass inflation, but it also allows full profit gain of investing in gold.
Pre-Maturity Withdrawal Facility
Sovereign Gold Bonds (SGB) are usually issued for 8 years. However, investors can redeem them after 5 years on a specified date. The SGB 2020-21 Series VII was issued on October 20, 2020, and the pre-maturity withdrawal date is October 20, 2025. Investors who want to use this option must apply through their bank or agency within the given time frame.
How is the Price Determined?
RBI calculates the SGB price based on the average closing price of 999 purity gold published by the India Bullion and Jewellers Association (IBJA) for the previous three business days (October 15, 16, and 17, 2025). This method is transparent and ensures investors get a price close to the current market price.
Benefits of SGB
Fixed Interest: Investors earn 2.5% per year on their investment. Interest is paid every 6 months. The 153% profit from redemption is in addition to this interest.
Security: It is a government-backed scheme guaranteed by RBI, so there is no risk of theft or loss like physical gold.
Purity and Charges: There are no making charges or purity concerns. Bonds are held in demat form or as certificates.
Tax Exemption: If you hold the bond for the full 8 years, capital gains are tax-free at maturity.
What Should Investors Do Now?
If you invested in SGB 2020-21 Series VII, now is a good time to review your investment. A 153% gain is very attractive.
If you need money soon or want to lock in your profit, you can apply for pre-maturity redemption. The amount and interest will be deposited directly into your bank account.
If you do not need money urgently, holding the bond for the full 8-year term will give you the full tax-free gains.
This makes SGB a safe and profitable investment option compared to physical gold.
