What happens when you miss SGB premature redemption date? Check full RBI rules on SGBs here

Sovereign Gold Bonds, government-backed securities that are measured in grams of gold, have been delivering bumper returns in 2025, going up to over 300%.

With rising gold prices, returns on SGBs have grown dramatically this year. While gold has surged over 50%, these bonds have been delivering spectacular returns on redemption (or premature redemption) in the past few months. For example:

• SGB 2017-18 Series IV delivered 325% returns
• SGB 2017-18 Series II delivered 250% returns
• SGB Series-V delivered 303% returns

Even more so, the government discontinued the SGB scheme in the Union Budget 2025 as these bonds weren’t cost-effective anymore.

On top of these returns, SGBs offer 2.5% annual interest that is paid to investors twice a year.

“The Bonds bear interest at the rate of 2.50% (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor, and the last interest will be payable on maturity along with the principal,” as per the RBI.

Now, SGBs have a tenure of 8 years, but can be redeemed early after 5 years from the date of issue. For premature redemption, the RBI releases a list of Sovereign Gold Bonds eligible tranches every six months, inviting investors to apply for early exit.

“Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges if held in demat form. It can also be transferred to any other eligible investor,” the RBI says.

The SGBs can be redeemed prematurely only on the interest payment date.

• If you miss the RBI-announced premature-redemption window/date for your SGB tranche, you:

• Either RBI-announced premature-redemption window/date for your SGB tranche, which will be the next interest-payment date on which RBI permits premature exit

• Or sell it in the secondary market

Here is the detailed explanation for this:

SGB premature redemption

SGBs can be redeemed prematurely only on the dates on which interest (also known as a coupon) is payable. The central bank publishes redemption dates for tranches that become eligible every six months.

To get premature redemption, investors have to request within the submission window published for that tranche. You have to approach the receiving office, which can be the issuing bank branch, the designated Post Office, your agent, the Stock Holding Corporation of India office, the RBI Retail Direct, or through the office where you purchased the bonds.

You must approach the receiving office 30 days before the interest payment date. Proceeds will be credited to the bank account the subscriber provided when buying the bond.

“In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent thirty days before the coupon payment date. Requests for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer’s bank account provided at the time of applying for the bond,” as per the RBI’s website.

• Wait for the next eligible premature-redemption date for the same tranche
• Sell in the secondary market
• Hold the bonds until they mature after 8 years from the date of issuance

For premature redemption, you will need ID proof, bank account details and other relevant documents like holding certificates. You can also redeem partially, as partial redemption is allowed in multiples of 1 gram.

“Yes, part holdings can be redeemed in multiples of one gm,” as per the RBI’s website.

Prices for premature redemption

The RBI calculates the redemption prices 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).

“The nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of the simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period,” as per the RBI.