RBI fixes redemption price for gold bonds at Rs 12,198 per unit

Mumbai, Oct 28 The Reserve Bank of India (RBI) has announced a price of Rs 12,198 per unit for the premature redemption of the Sovereign Gold Bond (SGB) 2020-21 Series-I dated October 28, 2020.

Investors will receive the option to redeem the SGB tranche prematurely from Tuesday itself, according to an RBI statement.

The RBI further stated that the redemption price has been calculated using the simple average closing price of gold at 999 purity as published by the India Bullion and Jewellers Association (IBJA).

Based on this estimate, the central bank has announced that the premature redemption price for the Sovereign Gold Bond (SGB) 2020-21 Series-I, due on October 28, 2025, will be Rs 12,198 per unit. This price is based on the simple average of the closing prices of gold over three business days of October 23, 24, and 27, 2025.

When this series was first issued, investors who applied online paid Rs 4,589 per gram, while those who bought offline paid Rs 4,639 per gram. At the current redemption value, the price has jumped nearly threefold over the five-year period. In addition, investors holding these bonds have earned an annual interest over the five-year period.

The RBI has also clarified that the premature redemption of the SGB series will be permitted after the fifth year from the date of issue of such gold bonds on the date on which interest is payable.

The SGB Scheme was introduced by the government in November 2015 as an alternative form of investing in gold. The bonds, issued by the RBI on behalf of the Centre, were denominated in grams of gold and offered investors a fixed annual interest of 2.5 per cent on the issue price and returns due to the appreciation in gold prices. The scheme was mainly aimed at reducing imports of gold, which was leading to an outflow of precious foreign exchange that was leading to a wider current account deficit. Besides, the bonds help to channel household savings into financial assets.

The bonds have a fixed term of eight years, but investors have the choice of exiting after five years on the date on which the interest is payable. SGBs can also be traded on stock exchanges, transferred to others, or used as collateral for raising loans from banks.

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