SGB: There’s good news for investors who invested in Sovereign Gold Bonds (SGBs) in 2020. The Reserve Bank of India (RBI) has announced the premature redemption date and price for SGB 2020-21 Series III. This makes it clear that gold bonds have delivered impressive returns to investors over the past five years.
Sovereign Gold Bonds are a Government of India scheme managed by the RBI. Its total maturity period is 8 years, but investors have the option of premature redemption after 5 years. This means that investors can withdraw their funds mid-term without waiting the full 8 years.
Issue Price of SGB 2020-21 Series-III
This series was issued on June 16, 2020. At that time, the price for offline investors was set at Rs 4,677 per gram. Those who applied online and made digital payments received a discount of Rs 50 per gram. The issue price for such investors was Rs 4,627 per gram.
At what price will you get the money now?
According to the RBI, the premature redemption date for SGB 2020-21 Series III has been set at December 16, 2025. The redemption price is based on the average price of gold over the last three trading days. Consequently, the redemption price per gram of gold bond will be Rs 13,152.
How an investment of Rs 5 lakh became Rs 14.2 lakh?
If an investor invested approximately Rs 5 lakh in 2020, its value at the current redemption price would be approximately Rs 14.2 lakh. Based on price alone, the profit per gram invested is approximately Rs 8,525. This translates to a simple percentage return of approximately 184%, excluding interest.
Additional income from interest
Another special feature of SGBs is that they offer investors a 2.5% interest rate per annum. This interest is directly credited to their bank account every six months. The final interest payment is made along with the principal amount at the time of redemption or maturity, further enhancing the total return.
Why is SGB better than physical gold?
Sovereign Gold Bonds are a safe alternative to physical gold. There’s no fear of theft or concern about purity. These bonds are transferable, tradeable on exchanges, and can be collateralized for loans if needed. The price of SGBs is based on the 999 purity gold rate published by the India Bullion and Jewellers Association (IBJA). The price is determined by taking the average of the three trading days preceding the subscription.