Over 300% returns on Sovereign Gold Bond: 2017 series hits Rs 12,801 payout

The series has delivered an exceptional simple return of 341%, setting a redemption price of Rs 12,801 per gram

Investors in the sovereign Gold Bond (SGB) 2017-18 Series-XI will receive a redemption price of Rs 12,801 per gram from December 11, marking one of the strongest payouts for the scheme since inception. The Reserve Bank of India (RBI) has confirmed the premature redemption price for SGB 2019-20 Series-I at the same level, as both series follow the identical valuation formula.

 

How the 2017 series generated a 341 per cent return

The 2017-18 Series-XI was issued at Rs 2,952 per gram (Rs 2,902 for online subscribers). With the final redemption price set at Rs 12,801, investors earn an absolute gain of Rs 9,899 per gram over the eight-year tenure. It translates to a simple return of about 341 per cent, excluding the 2.5 per cent annual interest that SGBs pay during the holding period.

 

Key figures for 2017-18 Series-XI 

• Issue date: December 11, 2017

• Issue price: Rs 2,952 (Rs 2,902 for online buyers)

• Redemption price: Rs 12,801

• Absolute gain: Rs 9,899 per gram

• Simple return: 341 per cent (excluding interest)

 

The redemption value is computed as the simple average of the closing price of 999-purity gold published by the India Bullion and Jewellers Association for the three business days preceding the maturity date.

 

Premature exit for 2019-20 Series-I

 

While SGBs carry an eight-year maturity, the RBI allows early exit after the fifth year, but only on interest payment dates. For the 2019-20 Series-I, issued on 11 June 2019, the first eligible premature redemption date falling this cycle is 11 December 2025. Holders opting for this exit will also receive Rs 12,801 per gram.

 

Key figures for 2019-20 Series-I

• Issue price: Rs 3,196 (Rs 3,146 for online subscribers)

• Eligible early redemption date: 11 December 2025

• Redemption price: Rs 12,801

 

Why investors prefer SGBs over physical gold

 

SGBs offer a regulated, cost-efficient alternative to physical gold. They eliminate storage and purity risks and provide annual interest, which physical gold does not. The bonds are tradable, transferable and can be pledged as collateral. The redemption amount is tax-free for individual investors upon maturity.

 

Benefits include:

• No storage or insurance cost

• 2.5 per cent annual interest

• Capital gains tax exemption at maturity

• Backed by the Government of India

• Seamless redemption into bank accounts

 

At the same time, the value remains linked to market gold prices, so returns can fluctuate. A fall in gold prices could reduce redemption proceeds, though the quantity of gold purchased remains protected.

 

How redemption works

 

Investors receive an intimation one month before maturity. On the due date, the proceeds are credited directly to the investor’s registered bank account. Any change in bank or contact details must be updated with the bank, the post office, SHCIL, or the depository participant to avoid delays.

 

Notably, no new SGB tranches have been announced since February 2024.