SGB 2018-19 Series VI Investors See 361% Return on Premature Redemption
Investors in the Sovereign Gold Bond (SGB) 2018-19 Series VI can redeem their bonds prematurely starting today, with the Reserve Bank of India (RBI) setting the redemption price at ₹15,102 per unit. This translates to an impressive 361% return for those who purchased the bonds at the initial issue price of ₹3,276, excluding the annual interest.
Key takeaways
- SGB 2018-19 Series VI investors can redeem bonds prematurely at ₹15,102 per unit.
- This redemption price offers a 361% return on the original issue price of ₹3,276.
- The return excludes the 2.5% annual interest paid on SGBs.
- SGB redemption prices are linked to the average gold price of the preceding three working days.
The premature redemption window for the Sovereign Gold Bond (SGB) 2018-19 Series VI has opened today, offering a significant windfall for early investors. The Reserve Bank of India (RBI) has fixed the redemption price for these bonds at ₹15,102 per unit, marking a substantial gain for bondholders.
For investors who subscribed to this particular series at its initial issue price of ₹3,276 per unit, the current redemption price represents an approximate return of 361%. This calculation excludes the additional 2.5% annual interest that SGBs pay out, further enhancing the overall profitability for these investors.
Understanding SGB Premature Redemption
Sovereign Gold Bonds are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors pay the issue price and the bonds are redeemed in cash on maturity. A key feature of SGBs is the option for premature redemption after the fifth year from the date of issue, which is typically exercised on interest payment dates.
The redemption price for SGBs is calculated based on the simple average of the closing price of 999 purity gold, published by the India Bullion and Jewellers Association (IBJA) Limited, for the last three working days of the week preceding the date of redemption. This mechanism ensures that investors receive a fair market price for their gold bonds at the time of redemption.
The SGB scheme was launched by the Government of India in November 2015 to reduce the demand for physical gold and shift a part of the domestic savings used for purchasing gold into financial savings. These bonds offer a safe and convenient way to invest in gold without the associated risks and costs of physical gold, such as storage and making charges.
The impressive returns seen in the 2018-19 Series VI highlight the potential benefits of investing in SGBs, especially during periods of rising gold prices. While the 2.5% annual interest provides a steady income, the capital appreciation linked to gold prices can significantly boost overall returns, as demonstrated by this premature redemption.
Investors holding SGBs from other series should keep track of their premature redemption eligibility dates and the prevailing gold prices to make informed decisions about their investments.
This article is for informational purposes only and does not constitute financial or investment advice.
Frequently asked questions
What is the redemption price for SGB 2018-19 Series VI?
The Reserve Bank of India (RBI) has fixed the premature redemption price for SGB 2018-19 Series VI at ₹15,102 per unit.
What kind of return are investors getting on this SGB series?
Investors who bought the bonds at the issue price of ₹3,276 per unit are seeing approximately a 361% return, not including the 2.5% annual interest.
How is the SGB premature redemption price determined?
The redemption price is based on the simple average of the closing price of 999 purity gold, as published by IBJA Limited, for the last three working days preceding the redemption date.