The Reserve Bank of India has fixed the premature withdrawal price of Sovereign Gold Bonds (SGBs) 2016-17 Series I as ₹5,950.
The issue price of gold bonds was ₹3,119. Thanks to the price differential, these gold bonds have, therefore, managed to deliver an absolute return of nearly 91 percent in 6.5 years and compound annual growth rate (CAGR) of approximately 9.7 percent.
These bonds were issued in 2016 and were to be repayable on the expiration of eight years from August 5, 2016, the date of issue of gold bonds.
Premature redemption of the bond is permitted from the fifth year of the date of issue on the interest payment dates. This means from Aug 5, 2021 onward.
SGBs: 2016-17 Series I: A fact sheet
|Issue price||₹3,119 (Aug 2016)|
|Absolute returns||91% in 6.5 years|
For the unversed, gold bonds are denominated in units of one gram of gold and multiples thereof. One can make a minimum investment in the bonds of one gram with a maximum limit of subscription of five hundred grams per person per fiscal year.
In case you are wondering how the price is determined, it needs to be understood that the price of the bonds is fixed on the basis of a simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week preceding the subscription period.
These gold bonds may be used as collateral for loans. The Loan to Value ratio will be as applicable to ordinary gold loans mandated by the RBI from time to time. The lien on the bonds shall be marked in the depository by the authorised banks.
Payment shall be accepted in Indian rupees through cash up to a maximum of ₹20,000 or demand drafts or cheque or electronic banking.
Where payment is made through cheque or demand draft, the same shall be drawn in favour of receiving office.