SGB Scheme: RBI Offers Premature Redemption Of 2020-21 Series-I Bonds; Investors Can Bag 166% Returns
The Reserve Bank of India announced the premature redemption price of Rs 12,198 per unit for Sovereign Gold Bond 2020-21 Series-I. According to calculations, these premature redemptions can yield up to 166% in returns.
The bonds have the issue date of Oct. 28, 2020. Investors will be able to redeem this tranche on a premature basis from Oct 28, 2025, according to a statement from the RBI. Premature redemption of the SGB series is usually allowed after the fifth year from the date of issue of these gold bonds, and on the date on which interest is payable according to the central bank.
How is the Redemption Value Calculated?
The redemption value is calculated on the basis of the simple average closing price of the gold of 999 purity, published by the India Bullion and Jewellers Association for the previous three working days, the rule states.
The three working days were Oct. 23, 2025, Oct. 24, 2025, and Oct. 27, 2025, making premature redemption of bonds viable from Tuesday onwards.
Return on Investment
The 2020-21 Series-I was issued for the price of Rs 4,589 per gram for online bonds. It is set to yield an absolute simple return of close to 166% on the date of the premature redemption.
The absolute return is calculated by subtracting the premature redemption price and the price of issue and dividing the resulting amount by the issue price multiplied by hundred as shown below.
Rs 12,198 – Rs 4,589 = Rs 7,609 (without taking interest into consideration). This would be expressed in percentage terms as 7609 ÷ 4,589 ×100 = 165.8%.
For investors who purchased SGBs of the same series offline, the issue price was at Rs 4,639 per gram of gold.
What are Sovereign Gold Bonds?
Sovereign Gold Bonds are a type of gold investment offered by the Reserve Bank of India. They are denominated in grams of gold and can be purchased in multiples of one gram, with a minimum investment of one gram and a maximum investment of four kilograms.
Benefits of Sovereign Gold Bonds
Sovereign Gold Bonds offer several benefits to investors, including:
- Fixed interest rate of 2.50% per annum, payable semi-annually
- Exemption from capital gains tax on redemption
- No risk of theft or loss, as the bonds are held in a demat account
- No risk of gold price volatility, as the bonds are denominated in grams of gold
How to Invest in Sovereign Gold Bonds
To invest in Sovereign Gold Bonds, investors can follow these steps:
- Open a demat account with a registered stockbroker or bank
- Apply for the Sovereign Gold Bond scheme through the online trading platform or by submitting a physical application form
- Purchase the bonds in multiples of one gram, with a minimum investment of one gram and a maximum investment of four kilograms
Conclusion
In conclusion, the premature redemption of Sovereign Gold Bond 2020-21 Series-I offers investors a return of up to 166%. Investors who purchased these bonds can redeem them on a premature basis from Oct 28, 2025. Sovereign Gold Bonds are a type of gold investment that offers several benefits, including a fixed interest rate, exemption from capital gains tax, and no risk of theft or loss.