Sovereign Gold Bond premature redemption: Investors can withdraw this tranche at 118% higher than issue price The due date for premature withdrawal is December 26, 2023. In absolute terms the return from premature redemption of this SGB comes to Rs 3,386 without factoring the interest given by the SGB
Sovereign Gold Bond (SGB) 2017-18 Series XIII premature redemption price is fixed at Rs 6,249 per unit of SGB, according to a press release by the Reserve Bank of India (RBI) dated December 22, 2023. It is around 118.14% higher than the said gold bond's issue price of Rs 2,866. The due date for premature withdrawal is December 26, 2023."Accordingly, the next due date of premature redemption of the above tranche (SGB 2017-18 Series XIII) shall be December 26, 2023. The redemption price of SGB shall be based on the simple average of closing gold price of 999 purity of the previous three business days from the date of redemption as published by the India Bullion and Jewellers Association Ltd (IBJA). Accordingly, the redemption price for premature redemption due on December 26, 2023, shall be Rs 6249/- (Rupees Six thousand two hundred forty-nine only) per unit of SGB based on the simple average of closing gold price for three business days i.e., December 20-22, 2023," said the RBI in the press release.
How much money can be made by redeeming SGB 2017-18 XIII now?
SGB 2017-18 Series XIII was issued at Rs 2,866 per unit of SGB on December 26, 2017. Each unit of SGB is equal to one gram of gold.So the absolute return comes to Rs 6249 - Rs 2,866= Rs 3,386 (without factoring in the interest). In percentage terms, the absolute return comes to Rs {(3,386/2,866) *100} %= 118.1437%.
Hence 2017-18 SGB XIII stands to gain a 118% higher price than the issue price of the bond if they put in the request for premature withdrawal.
How to apply for premature withdrawal of SGBs
Every SGB is issued for a tenure of eight years, so if an individual wishes to redeem their SGBs earlier then it can only be possible from the 5th year from the date of issue of coupon payment onwards of the said bond."Though the tenor of the bond is eight years, early encashment/redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges if held in demat form. It can also be transferred to any other eligible investor," said the RBI in an FAQ.
The RBI has said in an FAQ about SGB that in case of premature redemption of SGBs, investors should first approach their concerned bank or SHCIL offices or post office or the agent from whom they bought the bond. "Investors should approach them thirty days before the coupon payment date. Requests for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer's bank account provided at the time of applying for the bond," said the RBI.
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This story originally appeared on: India Times - Author:Faqs of Insurances
