SGB Scheme: RBI Offers Premature Redemption Of 2020–21 Series-I Bonds; Investors Can Bag 166% Returns

The Reserve Bank of India announced the premature redemption price of Rs 12,198 per unit for Sovereign Gold Bond 2020-21 Series-I.

According to calculations, these premature redemptions can yield up to 166% in returns.

The bonds have the issue date of Oct. 28, 2020. Investors will be able to redeem this tranche on a premature basis from Oct 28. 2025, according to a statement from the RBI.

Premature redemption of the SGB series is usually allowed after the fifth year from the date of issue of these gold bonds, and on the date on which interest is payable according to the central bank.

The redemption value is calculated on the basis of the simple average closing price of the gold of 999 purity, published by the India Bullion and Jewellers Association for the previous three working days, the rule states.

The three working days were Oct. 23, 2025, Oct. 24, 2025, and Oct. 27, 2025, making premature redemption of bonds viable from Tuesday onwards.

The 2020-21 Series-I was issued for the price of Rs 4,589 per gram for online bonds. It is set to yield an absolute simple return of close to 166% on the date of the premature redemption.

The absolute return is calculated by subtracting the premature redemption price and the price of issue and dividing the resulting amount by the issue price multiplied by hundred as shown below.

Rs 12,198 - Rs 4,589 = Rs 7,609 (without taking interest into consideration). This would be expressed in percentage terms as 7609 ÷ 4,589 ×100 = 165.8%.

For investors who purchased SGBs of the same series offline, the issue price was at Rs 4,639 per gram of gold.