300% gains for 2017-18 SGB investors as RBI announces redemption value

Central bank pegs final payout at Rs 12,300 per unit for maturing gold bond issued in November 2017

Investors in the Sovereign Gold Bond (SGB) 2017-18 Series-VIII are set for standout gains as the Reserve Bank of India (RBI) has announced the final redemption price for the tranche maturing on November 20, 2025.

 

The central bank has fixed the payout at Rs 12,300 per unit, based on the simple average of 999-purity gold prices published by the India Bullion and Jewellers Association for November 17, 18 and 19.

 

The Series-VIII bond was issued in November 2017 at Rs 2,951 per gram. With the redemption rate now set, investors will receive Rs 9,349 more per unit, translating into a total return of about 317 per cent over eight years.

 

Issue price (2017): Rs 2,951

 

Redemption price (2025): Rs 12,300

 

Absolute gain: Rs 9,349 per unit

 

Total return: More than 300 per cent over eight years

 

In annualised terms, the investment works out to a 19.7 per cent compound annual growth rate. This excludes the 2.5 per cent yearly interest that SGBs paid until 2023, which further boosts the overall return.

What happens at redemption?

 

Bondholders do not need to take any action for maturity proceeds.

 

The RBI credits the full amount directly to the linked bank account.

 

For individual investors, capital gains on redemption are fully tax-exempt.

 

If the bond is sold before maturity, indexation benefits apply to long-term capital gains.

 

The SGB programme carries an eight-year tenure, with an option to exit after the fifth year on interest-payment dates. This allows investors flexibility to cash out partially or fully depending on market conditions.

Why the returns are so strong

 

SGBs mirror the market price of gold. With bullion prices rising sharply since 2017, the bond has captured the entire rally while also offering annual interest during the holding period. This combination has made the 2017-18 tranche one of the most rewarding government-backed retail products of the past decade.

 

The SGB scheme, launched in 2015 to reduce physical gold demand, has not seen fresh issuances since last year as global prices surged.