Summary of this article
RBI fixes redemption price at Rs 15,334.
SGB investors gain over 227%.
Investors can redeem or continue holding.
Investors holding the Sovereign Gold Bond (SGB) 2021-2022 Series VI tranches are set to receive a significant jump in the value of their investment, should they decide to go in for premature redemption.
The Reserve Bank of India (RBI) has fixed the premature redemption price of these SGBs at Rs 15,334 per unit. The redemption will be available from September 7, 2026. As per a report by Upstox, premature redemption is allowed five years after the bond is issued. The SGB 2021-22 Series VI was originally issued on September 7, 2021.
How Much Have SGB Investors Gained?
The SGB 2021-22 Series VI was issued at Rs 4,682 per gram for investors who subscribed online. Against this issue price, the premature redemption value of Rs 15,334 represents a price appreciation of more than 227 per cent.
For instance, an investment of Rs 1 lakh at the issue price would correspond to roughly 21.36 units of the bond. At the announced redemption price, the holding would be worth approximately Rs 3.28 lakh, excluding the interest earned during the holding period.
SGBs also carry an annual interest of 2.50 per cent, payable semi-annually. Therefore, investors who held the bonds through the five-year period would have earned interest in addition to the increase in the gold-linked value of the investment.
How Is The Redemption Price Calculated?
The premature redemption value of an SGB is not based on its original issue price. Instead, it is linked to the prevailing price of gold. According to the RBI, the redemption price is determined using the simple average of the closing price of 999-purity gold for the three business days preceding the redemption date, as published by the India Bullion and Jewellers Association (IBJA).
For the September 7, 2026 redemption, the calculation is based on gold prices recorded from September 2-4, 2026. Based on this methodology, the RBI has fixed the redemption price at Rs 15,334 per unit.
What Should Investors Know Before Redeeming?
The five-year premature redemption facility does not mean SGB investors must exit their holdings. Investors who do not opt for premature redemption can continue holding the bonds until their scheduled maturity.
The decision to redeem, therefore, depends on an investor’s financial goals, view on gold prices, and the need for liquidity. Investors should also consider the applicable tax treatment before making a decision, particularly because taxation can differ depending on whether an SGB is redeemed through the RBI before maturity or sold through the secondary market.
The latest RBI announcement is particularly significant for holders of the 2021-22 Series VI tranche, as the bond has seen a substantial increase in its gold-linked value since its launch in 2021. With the redemption price now fixed at Rs 15,334, investors have an opportunity to review their gains and decide whether to exit after five years or continue holding the SGB for the remaining tenure.
