SGB Redemption: Investors Set To Get 300% Return On 2017-18 Series — RBI Fixes Price
On an annualised basis, the investment in SGB 2017-18 Series-VIII delivers an estimated 19.7% CAGR.
The Reserve Bank of India on Wednesday set the redemption price for the Sovereign Gold Bond (SGB) 2017-18 Series-VIII, that indicates a return of over 300% for investors. The final redemption date of the SGB tranche upon its eight-year maturity is Nov. 20.
The central bank has fixed the final redemption price at Rs 12,300 per unit, calculated on the basis of the simple average of 999-purity gold prices published by the India Bullion and Jewellers Association for the three business days preceding the redemption date — Nov. 17, 18 and 19, 2025.
The SGB was issued at Rs 2,951 per gram in November 2017. This means investors will enjoy an absolute gain of Rs 9,349 per unit over eight years of holding the bond. It translates to a total return of 317% for the full tenure.
On an annualised basis, the investment in SGB 2017-18 Series-VIII delivers an estimated 19.7% CAGR, even before including the 2.5% annual interest that SGBs pay.
Bondholders will receive the maturity amount directly into their linked bank accounts. The capital gains tax arising on redemption of these bonds to an individual is exempted. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of bond.
The SGBs have a tenure of eight years with an early exit option available after the fifth year, enabling investors to either hold the bonds until maturity or to liquidate the investment partially once the lock-in period gets over.
Since the bonds are linked to the market price of gold, investors can potentially benefit through capital appreciation if the price goes up while the investor is holding the bond.
The SGB Scheme was introduced by the government in 2015 as an alternative to attract gold ownership. Due to rising bullion prices, the government halted new bond issues last year.
