Premature redemption of SGB 2019-20 Series-VI becomes due today; check redemption price and absolute gains

For its Sovereign Gold Bond (SGB 2019-20 Series VI issue), the Reserve Bank of India (RBI) has announced the premature redemption date as April 30, 2026. As per the stated rules, premature redemption on SGB is allowed after the fifth year from the date of issuance of such bonds on the interest payment date.

Accordingly, the next due date of premature redemption of the above tranche shall be on April 30, 2026, said the RBI release.

The redemption price of SGB is based on a simple average of the closing price of gold of 999 purity of the previous three business days from the date of redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA).

Accordingly, the redemption price for premature redemption due on April 30, 2026, shall be ₹14,931/- per unit of SGB based on the simple average of the closing price of gold for the three business days, i.e., April 27, April 28, and April 29, 2026, it noted.

The SGB issue launched on October 30, 2019, was issued at a price of ₹3,835, meaning a good gain of 289%.

The halt in fresh SGB issuances came only after the stellar rally in gold prices turned borrowing via this route extremely expensive for the government. In addition, SGBs also offered a 2.5% interest rate annually. This is over and above the redemption price that is based on the prevailing gold prices.

What alternatives do you have in place of SGBs for fresh investments?

Investors looking to tap the bullish momentum in gold can still do so via several routes, such as gold ETFs, gold SIPs, gold fund of funds, as well as the gold monetisation scheme.