RBI Announces Sovereign Gold Bond 2020-21 Series-I Redemption Price at ₹12,198 Per Unit

The Reserve Bank of India (RBI) has announced the premature redemption price for the Sovereign Gold Bond (SGB) 2020-21 Series-I, which was issued on October 28, 2020. The price set for redemption is ₹12,198 per unit. Investors who purchased these bonds will have the option to redeem them prematurely starting from October 28, 2025, which is exactly five years after the issue date. This redemption can only occur on dates when interest is payable. The redemption price is determined by calculating the simple average of the closing prices of gold (with 999 purity) over three business days: October 23, 24, and 27, 2025, using data from the India Bullion and Jewellers Association (IBJA). When this series was initially issued, investors who applied online paid ₹4,589 per gram, while those who applied offline paid ₹4,639 per gram. At the announced redemption value, online investors stand to gain an absolute return of approximately 166%, which translates to a gain of ₹7,609 per gram (₹12,198 - ₹4,589), excluding the annual interest earned. The SGB scheme was introduced by the Indian government to provide an alternative to physical gold ownership and is issued by the RBI on behalf of the Centre.

Impact This news is highly significant for investors holding the Sovereign Gold Bond 2020-21 Series-I, as it confirms a substantial profit upon maturity or premature redemption. It reinforces the attractiveness of SGBs as an investment instrument for those looking to invest in gold without holding physical metal. The impact on the broader Indian stock market might be indirect, potentially influencing investor sentiment towards gold-backed assets. Rating: 7/10

Difficult Terms: Sovereign Gold Bond (SGB): A government-issued bond denominated in grams of gold. It serves as a substitute for holding physical gold, offering investors interest income and potential capital appreciation linked to gold prices. Premature Redemption: The act of redeeming an investment, like a bond, before its scheduled maturity date, under specific terms and conditions. India Bullion and Jewellers Association (IBJA): An organization representing bullion dealers and jewelers in India, which provides benchmarks for gold prices. Purity (999): Refers to 99.9% pure gold, the highest standard for gold bullion and jewelry.