The Reserve Bank of India has announced early redemptions for 30 series of Sovereign Gold Bonds (SGBs) that mature between October 1, 2024 and March 31, 2025. ET explains what it means for investors in this government-backed instrument.
When will the RBI buy back the SGBs from investors?
The RBI announced a calendar from September 2024 to March 2025, for buying back those bonds that have completed five years, giving investors an option to withdraw early, should they desire to do so. As per the conditions of this bond, the maturity of an SGB is eight years, with an early redemption option available once every six months after the bond tenure crosses five years.
Why is the central bank buying back the SGBs?
The central bank is buying these bonds in line with the terms specified when the bonds were issued.
Is it compulsory for investors to sell back the bonds to RBI?
No. The early redemption window is voluntary and there is no compulsion to surrender these bonds.
What should investors do?
Since the early redemption window is voluntary, financial planners believe investors should hold these bonds till maturity because of the advantages. Investors must avoid the temptation of pulling money out of it prematurely to park the proceeds in equities, they said.
Have investors made money in SGBs?
So far, four tranches of these bonds have completed their tenure of eight years. Investors have earned an average annualised return of 10.94% in these tranches. This return is tax-free for investors who hold these bonds till maturity. In addition, they have earned an interest of 2.5% per annum every year.
How many tranches of SGBs have been issued so far? Are further tranches likely?
The first tranche of the gold bond was announced in November 2015 and since then there have been a total of 67 tranches with the last one being issued in February 2024. So far, there has been no announcement of new issues of SGB by the government during the current financial year.
