Investors holding Sovereign Gold Bonds (SGBs) 2021-22 Series VII will get an opportunity to redeem their investments before maturity on November 2, 2026. The Reserve Bank of India (RBI) has announced a premature redemption price of Rs 14,167 per gram for this tranche, which was originally issued in November 2021. The announcement comes as the bonds complete five years from their date of issuance, making them eligible for early redemption under the applicable rules.
Investors who purchased these bonds at the time of the original issue could potentially book substantial gains, given the appreciation in gold prices over the holding period.
Besides the capital appreciation, SGB investors are also entitled to fixed interest payments.
The RBI has scheduled November 2, 2026, as the premature redemption date for 2021-22 Series VII. The tranche was initially issued on November 2, 2021.
As per the RBI’s press release dated October 30, investors can exercise the premature redemption option after completing five years from the bond’s issuance date, provided the redemption takes place on an interest payment date.
The central bank stated: “Premature redemption of Gold Bond may be permitted after fifth year from the date of issue of such Gold Bond on the date on which interest is payable. Accordingly, the due date of premature redemption of the above tranche shall be on November 02, 2026.”
Sovereign Gold Bonds are government securities issued by the RBI on behalf of the Government of India. Their value is denominated in grams of gold, allowing investors to benefit from movements in gold prices without purchasing or physically holding the metal.
How Has RBI Calculated The SGB Redemption Price?
The RBI has set the premature redemption value at Rs 14,167 per unit, with each unit representing one gram of gold.
The price is determined using the average closing rate of 999-purity gold over the three business days immediately preceding the redemption date. The India Bullion and Jewellers Association Ltd (IBJA) publishes the gold prices used for this calculation.
Explaining the valuation methodology, the RBI said: “The redemption price for premature redemption due on November 02, 2026, shall be Rs 14,167/- (Rupees Fourteen Thousand One Hundred and Sixty-Seven Only) per unit of SGB based on the simple average of closing price of gold for the three business days i.e., October 28, October 29, and October 30, 2026.”
Therefore, the redemption amount reflects the movement in gold prices over the holding period rather than the original issue price of the bonds.
SGB 2021-22 Series VII: How Much Capital Gain Will Investors Make?
The original issue price of SGB 2021-22 Series VII was Rs 4,765 per gram, according to the Ministry of Finance’s release published through the Press Information Bureau (PIB) on October 23, 2021.
However, investors who subscribed online and made payments through digital channels were offered a discount of Rs 50 per gram. This brought their effective purchase price down to Rs 4,715 per gram.
With the RBI announcing a redemption price of Rs 14,167 per gram, investors could make significant gains on their original investment.
The estimated returns for investors are as follows:
– Offline subscribers:
- Original purchase price: Rs 4,765 per gram
- Premature redemption price: Rs 14,167 per gram
- Capital gain: Rs 9,402 per gram
- Percentage gain: 197.31 per cent
– Online subscribers:
- Original purchase price: Rs 4,715 per gram
- Premature redemption price: Rs 14,167 per gram
- Capital gain: Rs 9,452 per gram
- Percentage gain: 200.47 per cent
Actual gains may vary.
An investor who purchased the bonds through the offline route would earn Rs 9,402 per gram in capital appreciation, representing a gain of 197.31 per cent over the original investment.
For those who opted for the online subscription facility, the gain would be higher at Rs 9,452 per gram. This translates into an appreciation of approximately 200.47 per cent.
In other words, an investment of Rs 47,650 in 10 grams of SGBs through the offline route would have a redemption value of Rs 1,41,670, excluding interest income and applicable taxes.
How Much Interest Will SGB Investors Receive?
Capital appreciation is not the only benefit of investing in Sovereign Gold Bonds. These securities also offer a fixed interest rate of 2.5% per annum on the original nominal investment amount.
The interest is paid twice a year and credited directly to the investor’s registered bank account. The final interest payment is made along with the redemption proceeds.
For SGB 2021-22 Series VII, the interest calculation is based on the original issue price of Rs 4,765 per gram, rather than the current redemption value of Rs 14,167.
For instance, an investor who purchased 10 grams of these bonds for Rs 47,650 would receive annual interest of Rs 1,191.25 at the rate of 2.5 per cent.
Over five complete years, the estimated interest income would work out to Rs 5,956.25.
These figures are illustrative and assume that the investor held the bonds throughout the five-year period and received all scheduled interest payments. The actual amount may differ depending on the holding period and payment schedule. Applicable taxes should also be considered while calculating the final returns.
Thus, investors redeeming SGB 2021-22 Series VII on November 2, 2026, stand to benefit from both the appreciation in gold prices and the fixed interest earned during the investment period.