SGB Redemption Today: RBI Fixes Price At ₹14,425; Investors Get 4.6x Their Original Investment
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RBI has fixed the final redemption price for SGB 2018-19 Series II at ₹14,425 per unit as the tranche matures today, October 23. The bonds were issued at ₹3,146 per gram in October 2018, taking the value of the investment to about 4.6 times the original issue price, excluding interest.
The Reserve Bank of India (RBI) has fixed the final redemption price for Sovereign Gold Bond (SGB) 2018-19 Series II at ₹14,425 per unit as the tranche completes its eight-year tenure on Friday, October 23.
The bonds were issued on October 23, 2018, at ₹3,146 per gram. At today’s redemption price, the value of the investment has risen by ₹11,279 per gram, or about 358%, over the eight-year period. The investment is now worth around 4.6 times the original issue price, excluding the interest received by investors during the period.
For instance, ₹1 lakh invested at the ₹3,146 issue price would translate into a redemption value of roughly ₹4.59 lakh based on the increase in the price of gold alone. Investors also received interest at 2.5% per annum on the initial investment amount during the holding period.
The RBI announced the final redemption price on Thursday, October 22, ahead of the maturity of the tranche today.
SGB Redemption Price Today At ₹14,425
The ₹14,425 redemption price has been calculated using the simple average of the closing price of gold of 999 purity for the three business days preceding redemption.
For the October 23 redemption, the RBI used gold prices for October 19, October 21 and October 22, as published by the India Bullion and Jewellers Association (IBJA).
The final redemption marks the end of the eight-year tenure for investors who subscribed to the 2018-19 Series II tranche and continued to hold the bonds until maturity.
The tranche had opened for subscription from October 15 to October 19, 2018, before being issued on October 23.
The government had fixed the issue price at ₹3,146 per gram. Investors who applied online and made the payment digitally were offered a discount of ₹50 per gram, taking their issue price to ₹3,096.
That makes the return higher for investors who subscribed through the digital route. At the ₹3,096 issue price, the redemption value of ₹14,425 is around 4.66 times the amount paid per gram.
SGB 2018-19 Series II Returns Over Eight Years
The rise in the redemption value is only one part of the return earned by investors in the tranche.
Sovereign Gold Bonds carry a fixed interest rate of 2.5% per annum on the nominal value of the investment. The interest is paid every six months, with the final interest payable at maturity along with the principal.
The ₹14,425 final redemption price therefore does not include the interest payments received by investors during the eight-year holding period.
For an investor who bought one gram at ₹3,146, the increase in redemption value alone works out to ₹11,279.
An investor who subscribed digitally at ₹3,096 per gram has seen an increase of ₹11,329 per gram in the redemption value, apart from the interest earned during the period.
The sharp increase reflects the rise in domestic gold prices since the tranche was issued in October 2018.
SGB Final Redemption Price
SGBs are denominated in grams of gold and have a maturity period of eight years.
At maturity, investors do not receive physical gold. The bonds are redeemed in rupees based on the applicable gold price.
Under the scheme, the redemption price is linked to the simple average closing price of gold of 999 purity during the three business days preceding the redemption date, based on prices published by IBJA.
For SGB 2018-19 Series II, this calculation resulted in the final redemption price of ₹14,425 per unit.
The bonds also provided an option for premature redemption after the fifth year, with such exits allowed on specified interest-payment dates.
Investors who continued to hold the Series II tranche instead of opting for premature redemption will now receive the final redemption amount as the bonds complete eight years from their October 23, 2018 issue date.
The 2018-19 Series II was part of a broader SGB issuance programme announced by the government in 2018, with subsequent tranches issued between November 2018 and February 2019.
This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Rochelle Britto has spent 8+ years decoding India's markets, businesses, and consumer economy, reporting for ET Prime and Times Internet along the way, covering the stories behind the numbers.
A Mumbai native and perpetual planner of the next holiday, she stays far, far away from the eternal question, “Where are we going next?” When she's not chasing headlines, she's chasing new cultures, open roads, and a bit of quiet in nature.
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