Redemption price of 1st SGB tranche announced; investors make 128% return excluding interest

The Reserve Bank of India (RBI) has announced the final redemption price of the first tranche of the sovereign gold bond (SGB) scheme at Rs 6,132 per gram and fixed the redemption date as November 30, Thursday. The investors who invested in the scheme have made an income of a whopping 128% (Rs 3,448) over the issue price of Rs 2,684 per gram. This does not include an interest income of 2.5% given by the government.

The first tranche of the SGB (SGB 2015-I) was launched on November 5 and was available for subscription till November 20, 2015. It was issued on November 30, 2015.

The SGBs are repayable on the expiration of eight years from the date of the issue of the Gold Bonds.

The redemption price of SGB is based on the simple average of the closing price of gold of 999 purity of the week (Monday, November 20-Friday, November 24), preceding the date of redemption, as published by the India Bullion and Jewellers Association Ltd. (IBJA).

Meanwhile, the issue price of SGBs is based on the simple average closing price for gold of 999 purity in the last three working days of the week preceding the subscription period. The RBI decides the price based on the price published by IBJA.

In the current financial year, the RBI on behalf of the Government of India issued SGBs in two tranches — the first tranche opened for subscription in June at an issue price of Rs 5,926 per gram while the second tranche was available for subscription in September at an issue price of Rs 5,923 per gram.
The SGBs are restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions. They are denominated in multiples of gram(s) of gold with a basic unit of one gram. While the tenor of the SGB is 8 years, investors have an option of premature redemption after the 5th year.The minimum permissible investment will be one gram of gold while the maximum limit of subscription is 4 Kg for individuals, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal year (April-March).

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