SGB early exit paid Rs 9,630/unit — over 200% returns from 2017 tranche; next window opens on Jun 11

The Reserve Bank of India (RBI) has outlined procedures for the premature redemption of Sovereign Gold Bonds (SGBs), offering investors a structured exit option through receiving offices, NSDL, CDSL, or RBI Retail Direct during designated periods. SGBs can be redeemed prematurely after the fifth year from issuance, but only on interest payment dates which occur every six months. 

The upcoming early redemption opportunity is scheduled for June 11, 2025, for the SGB 2019-20 Series I. The last early redemption window for SGB 2017-18 Series X  closed on June 4, 2025, with investors receiving Rs 9,630 per unit. This amount was based on the average gold price of 999 purity for May 30, June 2, and June 3, as reported by the India Bullion and Jewellers Association Ltd (IBJA).

The SGB 2017-18 Series X was initially issued on December 4, 2017, at a price of Rs 2,961 per gram. Investors have seen a return of over 225% in less than eight years, excluding the annual interest of 2.5% offered on the bond's face value.

Redemption price

The redemption price for these bonds is calculated as a simple average of the closing price of gold from the previous week, as published by the India Bullion and Jewellers Association. This method ensures that the redemption value reflects recent market conditions, though it may lead to fluctuations in the payout. Investors are able to initiate the redemption process through their designated bank, post office, or stock exchange where the SGB was initially purchased. Investors are encouraged to stay informed about the RBI's announcements regarding redemption prices to optimize their returns.

SGBs, launched in November 2015, have seen significant returns for investors. Of the 59 existing series, 49 have completed five years and qualify for premature redemption. The RBI has facilitated 131 instances of such redemptions, demonstrating a robust support system for investors seeking early exits. The bank also issues a biannual redemption calendar, listing eligible series for the next six months. Recent analyses show that early exit through the RBI's window can yield XIRR returns of 17-19%. This flexibility allows investors to capitalize on favorable market conditions, enhancing their overall investment strategy. 

SGB vs other gold investments

SGBs offer distinct advantages over other gold investments like gold ETFs and physical gold. They provide a fixed annual interest rate, typically ranging from 2.5% to 2.75%, which is not available with other gold options. Moreover, SGBs are more tax-efficient when held until maturity or redeemed through the RBI’s early redemption window, as capital gains tax is exempt in these scenarios. However, interest income from SGBs is subject to full taxation according to the applicable income tax slab. This tax efficiency, coupled with the interest income, makes SGBs a compelling choice for long-term investors. 

The RBI encourages investors to monitor redemption opportunities closely, as premature redemption can be advantageous. Gold should ideally make up 10-15% of an investment portfolio, serving as a hedge against inflation and economic uncertainty. Investors needing liquidity may consider premature redemption, especially if their SGB holdings exceed their target gold allocation. However, staying invested until maturity often provides greater benefits, given the bonds' interest payments and associated tax exemptions. This strategic approach ensures that investors can maximize their returns while maintaining a balanced portfolio. 

Alternative gold investment avenues like gold ETFs lack the fixed interest and tax benefits of SGBs and incur expense ratios that can erode returns. Therefore, while ETFs offer a digital means to invest in gold, SGBs may remain more appealing for those seeking stability and long-term gains. With no new SGB issues available, existing bonds have gained prominence due to their enhanced benefits. The unique combination of interest, tax efficiency, and market-linked returns positions SGBs as a superior investment vehicle in the current economic landscape.