Sovereign Gold Bonds up for early redemption on September 17: Find out how much you have earned

Investors holding the units of early series of Sovereign Gold Bonds (SGBs) have reasons to rejoice. The returns from series that were issued five years ago have more than doubled now, thus rewarding the investors handsomely.

SGBs are government-backed gold bonds issued by the RBI that come with tenures of eight years. However, the lock-in period is five years, which means investors have a chance to exit early if they wish to.

Although SGBs are listed on the stock exchanges, they are thinly traded. However, to provide an exit window, the RBI provides a buyback facility at the end of the fifth, sixth and seventh years.

Two SGB series – SGB 2016-17 Series IV and SGB 2019-20 Series IV were up for early redemption on September 17, 2024.

SGB 2016-17 Series IV was issued on March 17, 2017 with the issue price of Rs 2,943. The price for premature redemption was fixed at Rs 7,196 at the end of 7.5 years. This implies an XIRR (extended internal rate of return) of 14.5 percent (adjusted for coupon payments) for the investors holding the bond since launched.

Another one, ‘SGB 2019-20 Series IV’, was launched on September 17, 2019 with the issue price of Rs 3,890. The RBI has fixed the premature redemption price at Rs 7,278 at the end of 5 years. This implies an XIRR of 15.7 percent (adjusted for coupon payments).

These bonds were first launched in November 2015 and have been sold in 67 tranches subsequently.

Investors who want to make premature exits can utilise the buyback facility that allows redemption at the end of the fifth, sixth and seventh years. Unitholders can submit their redemption requests during the designated windows through (RBI’s) receiving offices, NSDL, CDSL, or the RBI Retail Direct platform.

In August, the RBI announced a calendar for premature redemption during October 2024 – March 2025 (see graphic). As many as 30 SGB series are coming up for redemption in the next six months. If you have invested in these bonds, ensure that you keep track of these dates to initiate the process on time.

Inform your agent, bank or post office that enabled you to buy these bonds. Make sure you initiate your redemption request at least 10 days before the interest payment date. Premature redemption requests are accepted by the RBI beginning one month before the coupon payout date.

The redemption price will be a simple average of the closing price of gold during the previous week (Monday to Friday) published by the India Bullion and Jewellers Association. The redemption proceeds are transferred to your bank account.

Gold has been considered as a hedge against inflation and economic uncertainties. If the value of your SGB holding now exceeds about 10 percent of your overall portfolio, then you can take some profits off the table. Else, stay invested.