A series of sovereign gold bond redemptions is occurring this week as they become eligible for premature exits. The Reserve Bank of India (RBI) has announced that the SGB 2020-21 Series-VII-Issue and the SGB 2018-19 Series-II-Issue are now redeemable.
Sovereign gold bonds, issued by the central bank on behalf of the government of India, typically have a tenure of eight years, with an exit option after five years. Redemption prices are based on the average closing price of gold of 999 purity over the previous three business days.
The RBI discontinued the scheme in 2024, citing it as an expensive borrowing method for the government. No fresh SGB issues have occurred in the last two fiscal years, and no announcements have been made for FY27.
The first wave of redemptions began in February, with more accelerating in April. For instance, the redemption price for the SGB 2020-21 Series-VII is set at Rs 15,554 per unit, compared to an issue price of Rs 5,051, yielding returns exceeding 200 percent.
Gold prices have significantly increased since 2020, prompting the RBI to allow early exits for investors. More tranches may become eligible for premature redemption through FY27, indicating that this trend is likely to continue.
