An absolute return of 235 per cent over five years, excluding the 2.5 per cent annual interest paid on the bonds. That is what investors in Sovereign Gold Bond (SGB) 2021-22 Series-I earned after the Reserve Bank of India (RBI) fixed the premature redemption price at Rs 15,840 per unit.
The RBI had announced that investors in this tranche became eligible for premature redemption from May 25, after completion of five years from the issue date. The bond was originally issued in May 2021 at Rs 4,727 per gram for online subscribers and Rs 4,777 per gram for offline subscribers.
The steep rise in redemption value underlines how gold has outperformed many traditional asset classes in recent years amid global uncertainty, inflation concerns and sustained safe-haven demand.
RBI fixes redemption price at Rs 15,840
According to the RBI, the premature redemption price for SGB 2021-22 Series-I was fixed at Rs 15,840 per unit.
The redemption amount was calculated using the simple average of the closing price of gold of 999 purity published by the India Bullion and Jewellers Association (IBJA) for the preceding three working days — May 20, May 21 and May 22, 2026.
SGBs have an eight-year maturity period, but investors are allowed to redeem them prematurely after the fifth year on designated interest payment dates.
How much did investors gain?
The SGB 2021-22 Series-I tranche was issued at:
-
Rs 4,727 per gram for online investors -
Rs 4,777 per gram for offline investors
Online subscribers had also received a Rs 50 discount per gram.
At the redemption price of Rs 15,840, online investors gained Rs 11,113 per gram over the issue price. This translates into an absolute return of around 235 per cent over five years, excluding the semi-annual interest payout of 2.5 per cent per annum.
In practical terms, an investment of Rs 1 lakh in the tranche in 2021 would now be worth nearly Rs 3.35 lakh, excluding the interest income already received during the holding period.
What should investors do now?
The sharp gains may encourage some investors to redeem and book profits, especially after gold’s strong rally over the past few years.
However, some investors may continue holding the bonds till maturity if they expect gold prices to remain firm amid geopolitical tensions and global economic uncertainty.
Investors should keep in mind:
Premature redemption is allowed only after five years on interest payment dates
Redemption proceeds are credited in cash to the investor’s bank account
Interest earned on SGBs remains taxable as per the investor’s income tax slab
The bonds can also be traded on stock exchanges, although liquidity is often limited
Capital gains on redemption are no longer exempt for secondary market buyers. Gains are taxed as Long-Term Capital Gains at 12.5 per cent.
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