Sovereign Gold Bond 2021-22 Series IV due for premature redemption today

For the Sovereign Gold Bond (SGB) 2021-22 Series IV issue, the Reserve Bank of India (RBI) has notified the premature redemption date as July 20, 2026. The bond was issued for subscription on July 20, 2021.

As per the RBI guidelines on SGB, investors can redeem their investment in SGB prematurely after a period of five years from the bond issuance date on the coupon payment date. Accordingly, the premature redemption of this SGB series can be made on July 20, 2026.

It is to be noted that the maturity term or tenure of these bonds is 8 years.

The RBI also announced the premature redemption price of these bonds as ₹14,158 per unit. The premature redemption price of SGB is calculated based on the simple average of closing price of gold of 999 purity of the previous three business days from the redemption date, as published by the India Bullion and Jewellers Association Ltd (IBJA). For the computation of the premature redemption price, the closing price of 999 purity gold for July 15, July 16 and July 17 was considered.

The issue was priced at ₹4,807 for regular offline subscribers, while online investors received a ₹50 per unit discount, taking the final subscription price to ₹4,757 per gm.

Considering the redemption price at ₹14,158, investors' in the instrument will be able to make an absolute return of 198%, nearly trebling their investment.

For the SGB 2020-21 Series X, the RBI allowed premature redemption on July 18 as July 19 was a holiday. The redemption price of this SGB issue was also ₹14,158 per unit. So, considering the issuance price at ₹5,054 (online applicants), investors would have made the maximum return of 180%.

Sovereign gold bonds currently discontinued

Given the steep rise in gold prices over the years, SGBs emerged as the high-cost borrowing method for the government. Consequently, in view of the huge burden in terms of interest payment and maturity amount (at the prevailing gold rate), the government discontinued fresh SGB issuances.