The Reserve Bank of India (RBI) has released the schedule for the premature redemption of 30 Sovereign Gold Bonds (SGBs) that were issued between May 2017 and May 2020. The redemption process will start on October 11, 2024, with subsequent dates scheduled up to February 7, 2025. The redemption price will be determined based on the average gold price over the three days preceding maturity.
An investor can redeem their money within a period of 20 days; the amount credited, along with interest, will be available in bank accounts within 10 days from the date of redemption request.
First Redemption Date: The first redemption period for SGBs issued on May 12, 2017, is from October 11, 2024, to November 2, 2024. The funds will be credited to investors’ accounts by November 12, 2024.
Overview of Sovereign Gold Bonds: SGBs are government-backed securities denominated in grams of gold, thereby associate with an alternate investment in physical gold. Though the bond tenures are 8 years, early redemption can be made after 5, 6, and 7 years. Minimum investment is one gram with limits of 4 kg per annum for individual investors and 20 kg for entities like trusts.
Future Issuance Uncertain: Since the issuance of SGBs started in 2015, the RBI has more or less been issuing bonds on a quarterly basis. However, since this June 2024 issuance did not come about, investors began to question whether any further issuances would happen at all. The number of tranches brought out under SGBs has fallen sharply in recent years, and subscriptions surged to 443 lakh units in the latest fiscal year. Recent Performance and Policy Changes On October 11, the RBI announced a redemption price for the August 2016 SGB issue of Rs 6,938 per gram, which represented an increase of 122% from its issue price. This was, however, 4.5% lower than the average gold price in the run-up to the government’s reduction in customs duty on gold in the 2024-25 Budget. It has hinted at a scale-down in SGB issuances; for FY25, the target stood at Rs 18,500 crore, down 38% from the previous projection.
This can be reduced, depending on the complexity of the instrument and its costing; thus, the SGB program is likely to be phased out.
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Source: BusinessToday
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