RBI announces premature redemption dates for 30 Sovereign Gold Bonds issued between May 2017 and May 2020

The Reserve Bank of India (RBI) has officially announced the dates for the premature redemption of Sovereign Gold Bonds (SGBs) issued between May 2017 and May 2020. In a move to provide investors with early liquidity options, the central bank plans to redeem 30 tranches of these bonds between October 11, 2024, and February 7, 2025.

The RBI will determine the redemption price based on the average gold prices from the last three business days before the maturity date. Investors holding these bonds will have the opportunity to submit redemption requests during a 20-day window, which will be provided before each bond's maturity. Once a request is submitted, the redemption amount, along with any accrued interest, will be credited to the investor’s account within 10 days.

The first redemption period is set to begin on October 11, 2024, for SGBs issued on May 12, 2017. This window will close on November 2, 2024, with the payout scheduled for November 12, 2024.

Sovereign Gold Bonds, which are government-backed securities denominated in grams of gold, provide a secure alternative to holding physical gold. They have a maturity period of eight years, but investors have the option for premature redemption after 5, 6, and 7 years.

While many investors might choose to hold these bonds to maturity (HTM), benefitting from continued interest payments and the potential for capital gains, the premature redemption windows offer flexibility. This allows investors to exit earlier, depending on market conditions and personal financial needs.

According to the RBI press release, “It may, however, be noted that the above-mentioned dates may undergo a change in case of unscheduled holiday/s. Investors are advised to take note of the period for submission of requests for redemption of SGB, in case they choose to redeem their holdings before maturity.”

Sovereign Gold Bonds are issued by the Government of India as Government of India Stock, in accordance with Section 3 of the Government Securities Act, 2006 (GS Act 2006). Currently, these bonds offer an interest rate of 2.5%, payable semi-annually.

The interest payments will be credited directly to the holder’s bank account by the RBI. For bonds held with depositories, the interest amount will be disbursed through the depositories, which will ensure the funds are transferred electronically to the holders' bank accounts on the due date.