Summary of this article
RBI sets premature redemption date for July 20, 2026.
Redemption price is fixed at Rs 14,158 per unit.
Early online investors secure an impressive 197.6 percent return.
The Reserve Bank of India (RBI) has announced the premature redemption price for the 2021-22 Series IV tranche of the Sovereign Gold Bond scheme. The premature redemption date comes at a time when gold has managed to hold its relevance. While the price of physical gold has corrected from the record highs witnessed earlier this year, the yellow metal is still trading with significant gains.
SGB 2021-22 Series IV Premature Redemption Date
Investors who hold units of SGB 2021-22 Series IV can redeem their holdings on July 20, 2026. RBI regulations allow the early redemption of SGBs five years from the date of issue on dates when interest is payable. The five-year window allows investors who hold SGBs to liquidate their holdings before the end of the eight-year maturity period.
How Much Will SGB 2021-22 Series IV Investors Gain?
Investors can prematurely redeem their SGB 2021-22 Series IV holdings at a price of Rs 14,158 per unit according to a release by the RBI. The subscription amount for online investors when the tranche originally launched in July 2021 was fixed at Rs 4,757 per gram, which included a digital discount of Rs 50. On the other hand, the issue price was fixed at Rs 4,807 for investors who purchased their SGBs offline.
"Accordingly, the redemption price for premature redemption due on July 20, 2026, shall be Rs 14,158/- (Rupees Fourteen Thousand One Hundred and Fifty Eight only) per unit of SGB based on the simple average of closing price of gold for the three business days i.e., July 15, July 16, and July 17, 2026," RBI said.
Given the redemption price set by RBI, investors who purchased the SGB units online are set to get an absolute return of approximately 197.6 per cent if they prematurely redeem their holdings. Online investors are set to get absolute capital gains of Rs 9,401 per unit, while offline buyers will see gains of Rs 9,351 per unit.
How Is The Premature Redemption Price Calculated?
The premature redemption price for SGBs is determined using the simple average of the closing prices of 999 purity gold from the India Bullion and Jewellers Association Ltd (IBJA). The closing price of gold from the previous three business days from the date of redemption is used for determining the simple average.
For the SGB 2021-22 Series IV, the premature redemption price was calculated on the basis of the simple average of the closing prices on July 15, July 16, and July 17, the prices on the three days were Rs 14177, Rs 14171 and Rs 14126 respectively.
SGB investors who purchased the bond would have also received an annual interest at the fixed rate of 2.50 per cent in addition to the amount they get upon redemption. However, this interest is credited semi-annually directly to the bank account of investors and remains taxable as per the income tax slab of the investor.
How Can Investors Invest In Paper Gold
Amid the rise in gold prices, investors have increasingly shown more interest in gaining alternatives to physical gold. These alternatives can potentially circumvent challenges related to safety, storage costs, and purity.
While Sovereign Gold Bonds serve as a suitable alternative, no new tranches have been announced since the 2023-24 Series IV tranche was issued on February 21, 2024. Amid no new issuances in sight, investors can still buy the bonds from the secondary market where existing tranches trade on stock exchanges.
However, in addition to secondary market bonds, investors have alternatives such as Electronic Gold Receipts (EGRs). Amid the ongoing investor interest in paper gold, investors are gravitating towards digital gold sold online through various unmonitored platforms. However, Sebi has strongly cautioned against doing so due to the lack of structural regulations, advising investors to instead put their money into regulated options like EGRs and Gold ETFs.
