SGB Scheme: Unlock 166% Returns with RBI’s Premature Redemption Offer for 2020-21 Series-I Bonds
The Reserve Bank of India has announced the premature redemption price of Rs 12,198 per unit for Sovereign Gold Bond 2020-21 Series-I, offering investors a chance to bag up to 166% returns. In this article, we will delve into the details of the SGB scheme, the premature redemption offer, and how investors can maximize their returns.
What is the SGB Scheme?
The Sovereign Gold Bond (SGB) scheme is a government-backed investment scheme that allows investors to purchase gold in a non-physical form. The scheme was introduced by the Reserve Bank of India in 2015 to reduce the demand for physical gold and to provide investors with a safe and secure way to invest in gold. The SGB scheme has been highly successful, with many investors opting for it as a safe-haven asset.
To learn more about the gold investment options available in India, check out our detailed guide.
Key Features of the SGB Scheme
The SGB scheme has several key features that make it an attractive investment option for investors. Some of the key features include:
- Investment in gold without the need to physically hold it
- Safe and secure investment, backed by the government
- No risk of theft or loss
- No storage costs
- Can be used as collateral for loans
- Tax benefits, such as exemption from capital gains tax
For more information on the tax benefits on gold investments, check out our in-depth analysis.
Premature Redemption Offer for 2020-21 Series-I Bonds
The Reserve Bank of India has announced the premature redemption price of Rs 12,198 per unit for Sovereign Gold Bond 2020-21 Series-I. The bonds have an issue date of October 28, 2020, and investors will be able to redeem this tranche on a premature basis from October 28, 2025.
According to calculations, these premature redemptions can yield up to 166% in returns. 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.
For example, if an investor purchased the SGBs online at the issue price of Rs 4,589 per gram, the absolute return would be:
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.
How to Maximize Returns on SGB Investments
To maximize returns on SGB investments, investors should consider the following strategies:
- Hold the SGBs for the long term to benefit from the power of compounding
- Invest in SGBs at the right time, when the gold price is low
- Consider investing in SGBs through the systematic investment plan to reduce the impact of market volatility
- Monitor the gold price and adjust the investment portfolio accordingly
For more information on investing in gold, check out our comprehensive guide.
Conclusion
The SGB scheme is a safe and secure way to invest in gold, and the premature redemption offer for 2020-21 Series-I bonds provides investors with a chance to bag up to 166% returns. By understanding the key features of the SGB scheme and using the right investment strategies, investors can maximize their returns and achieve their financial goals.