Investors in the Sovereign Gold Bond (SGB) Scheme 2019-20 Series VII are set to earn 101% returns through premature redemption. The RBI has announced the redemption price for these bonds, due on December 10, 2024, as ₹7,644 per unit, significantly higher than the issue price of ₹3,795 per unit.

The SGB scheme permits premature redemption after the fifth year from the issue date, aligned with interest payment dates.

For Series VII issued on December 10, 2019, the premature redemption option becomes available on December 10, 2024.

The redemption price is determined as the simple average of the closing price of gold (999 purity) for the three business days preceding the redemption date.

The India Bullion and Jewellers Association Ltd (IBJA) provided the prices for December 5, 6, and 9, 2024, which were averaged to calculate the redemption value.

Returns analysis

Excluding the annual interest of 2.5% paid on these bonds, the capital appreciation alone delivers a return of 101.43%.

Including interest payouts would enhance the total returns even further.

Why premature redemption matters

Premature redemption allows investors to access liquidity before the bond’s eight-year maturity.

It enables them to capitalise on rising gold prices while maintaining minimal risk to capital.

Redemption process

For premature redemption, investors must approach the concerned bank, SHCIL offices, post office, or agent thirty days before the coupon payment date.

The request must be submitted at least one day before the coupon payment date to be entertained by the concerned authorities.

The proceeds are then credited to the customer’s bank account provided at the time of bond application.