Investors Can Now Redeem Sovereign Gold Bond Series II Early

Those who invested in the March 2016 issue of sovereign gold bonds (SGBs) can now redeem the bond SGB Series II early. When they were released, the Reserve Bank of India set the per gram gold price at Rs. 2,916. Premature redemption is authorised by the central bank at Rs 4,491, which is 54% of the invested amount. These bonds were first released in November 2015, and they have since been sold in 49 tranches.

Every month during the current fiscal year, the government sold SGB. The most recent one began on March 1 and ended on March 5. The cost of a single unit was Rs 4,662.

The Sovereign Gold Bond (SGB) redemption gold price is based on the simple average closing gold price of 999 purity for the week (Monday-Friday) preceding the redemption date published by the India Bullion and Jewellers Association Ltd IBJA, the RBI said. Despite the fact that SGBs have an eight-year term, investors can redeem them early after five years, according to regulations.

SGBs are government securities denominated in grammes of gold. The issue price must be paid in cash, and the bonds must be repaid in cash when they reach their maturity date. The Reserve Bank of India is the issuer of the bond on behalf of the Indian government.

The Bonds will be repaid after an eight-year period from the date of issue, which is March 29, 2016. Premature redemption of the Bond is allowed on interest payment dates beginning in the fifth year after the date of issue. The Bonds can be used as loan collateral. The loan-to-value ratio will be the same as that needed by the RBI from time to time for ordinary gold loans. The approved banks must place a lien on the Bonds in the depository.

As a result, the early redemption price for the SGB due on March 29, 2021, will be Rs 4491/- per unit, payable on March 26, 2021. (March 27, 28 and 29 is Saturday, Sunday and Holiday respectively.)