​SGB 2020-21 Series-XI details: Premature redemption date today; 216% return for investors - Calculation EXPLAINED

SGB 2020-21 Series-XI details: The Reserve Bank of India (RBI) has announced the premature redemption price of Sovereign Gold Bonds (SGB) 2020-21 Series-XI. The series was issued on February 9, 2021. Even as the Sovereign Gold Bonds (SGBs) typically come with a maturity period of eight years, investors are allowed for premature redemption after the fifth year from the date of the issuance of the series.

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash, and the bonds will be redeemed in cash on maturity. The Bond is issued by the Reserve Bank on behalf of the Indian government.

SGB 2020-21 Series-XI issue price

For offline investors, the SGB 2020-21 Series-XI was issued at Rs 4,912 per gram. For online investors, the SGB 2020-21 Series-XI was issued at a discount of Rs 50 per gram when applied and paid through digital mode. For such investors, the issue price of the gold bond was Rs 4,862 per gram.

The premature redemption price of SGB 2020-21 Series-XI, due on January, February 9, 2026, is Rs 15,374 per unit of SGB based on the simple average of the closing price of gold for the three business days, i.e., February 4, February 5 and February 6, 2026.

Originally issued at Rs 4,862 per gram on February 9, 2021, the Sovereign Gold Bond (SGB) 2020-21 Series-XI is set to deliver a remarkable absolute simple return of approximately 216 per cent upon its premature redemption.

This return is calculated as the difference between the redemption price of Rs 15,374 and the issue price of Rs 4,862, resulting in a gain of Rs 10,510 per gram (excluding interest).

In percentage terms, this translates to 10,510 ÷ 4,862 × 100 = 216.2%

Sovereign Gold Bond (SGB) scheme FAQs

Why should I buy SGB instead of physical gold? What are the benefits?

The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form, eliminating the risk of loss of scrip, etc.

Are there any risks in investing in SGBs?

There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold that s/he has paid for.

Who is eligible to invest in SGBs?

Persons resident in India, as defined under the Foreign Exchange Management Act, 199,9 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with a subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.

What are the minimum and maximum limits for investment?

The bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March).

In the case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed to under different tranches during the initial issuance by the government and those purchased in the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other financial institutions.

What is the rate of interest, and how will the interest be paid?

The bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the investor's bank account, and the final interest payment will be made at maturity along with the principal.