SGB holders to receive 122% bonanza as RBI fixes final redemption price at Rs 6,938 for August 2016 issue

RBI has also set August 5, 2024 as the final redemption date for the scheme

The Reserve Bank of India (RBI) on August 2 declared Rs 6,938 per gram as the final redemption price for sovereign gold bonds (SGBs) issued on August 5, 2016, implying a gain of 122 percent, the central bank said in a notification.

The SGBs were issued at a price of Rs 3,119 per gram in August 2016.

RBI has also set August 5, 2024 as the final redemption date for the scheme.

The price of SGBs are fixed on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week preceding the subscription period, according to RBI.

The bondholders are also offered an annual interest rate of 2.5 percent, making the scheme an attractive investment option.

On August 1, a top government source told moneycontrol that SGB scheme is one of the most expensive instruments to fund the fiscal deficit and the Central government will take a "holistic call" on whether to continue with the scheme going ahead.

The official added that the Centre is not looking to replace SGB with an alternate scheme as of now, if they decide to discontinue it.

The official elaborated that the cost of funding fiscal deficit via sovereign gold bonds was higher than the benefit of reducing dependence on physical gold via the scheme, adding that the scheme is not a social sector scheme, rather an investment plan.

Recently, there has been some level of anxiety among SGB investors following market corrections and Centre's move to cut of customs duty on gold by 9 percentage points, announced in Budget 2024. Investors fear that their investments on the gold scheme may provide diminished returns.

However, revenue secretary Sanjay Malhotra on July 30 had assured that SGBs will get at least 12 percent return.