SGB 2019-20 Series VIII turns ₹10,000 into ₹35,283; premature redemption today

For Sovereign Gold Bond (SGB) 2019-20 Series VIII issue, the Reserve Bank of India (RBI) has notified the next premature redemption date as July 21, 2026. On the previous day, SGB 2021-22 Series IV was available for premature redemption.

The SGB 2019-20 Series VIII was officially issued on January 21, 2020. According to the RBI guidelines on SGBs, premature redemption is available after the completion of five years from the bond issuance date, on interest payment dates. As this tranche meets the premature redemption norms (requisite holding period completed), the RBI has announced its next premature redemption date.

On the basis of the simple average of the closing price of 999 purity gold of the previous three business days as published by the India Bullion and Jewelers Association, the premature redemption price is also announced for this tranche of SGB. According to RBI, for the SGB 2019-20 Series VIII, the premature redemption price is set at ₹14,170 per unit. For the calculation of the redemption price, closing price of July 16, July 17 and July 20 has been considered.

At the issue price of ₹4,016 per unit for offline subscription, investors would have got 2.49 units of SGB. Now, given the current premature redemption rate, an investment of ₹10,000 will be worth ₹35,283.86. This implies an absolute return of 253%. Investors who subscribed via the online route would have made a slightly higher return, as these SGBs were available to them at ₹50 per unit discount.

Can these SGB units be kept as collateral for loans?

According to the RBI, these securities are eligible to be used as collateral for loans from banks, financial institutions and NBFCs. The loan to value ratio will be the same as applicable to ordinary gold loans prescribed by RBI from time to time.