The Reserve Bank of India has announced the final redemption price for Sovereign Gold Bonds (SGBs) issued on August 5, 2016. The central bank has fixed the final redemption price at Rs 6,938 per gram, which is 122 percent higher than the issued price. The gold bonds were issued at a price of Rs 3,119 per gram in August 2016 by the Reserve Bank of India (RBI). The RBI has designated August 5, 2024, as the final redemption date for the scheme.
Adjusting for interest, specifically set at 2.75% payable semi-annually on the initial investment amount (issue price), the absolute return totals a little over 144%. When annualised, this equates to a return of approximately 12% CAGR. The final interest amount accumulated on the bonds will be disbursed directly to the holder’s bank account, in addition to the redemption amount.
“The redemption price for the SGBs maturing on August 05, 2024, has been set at ₹6938/- (Rupees Six thousand nine hundred and thirty-eight only) per unit. This rate is based on the average closing price of gold for the week of July 29 – August 02, 2024,” the RBI said in its release on Friday.
It is worth noting that the price of SGBs is determined based on the simple average of the closing price of gold of 999 purity as published by the India Bullion and Jewellers Association Limited for the week preceding the subscription period, as per the guidelines provided by the RBI.
Read More: Petrol, Diesel Fresh Prices Announced: Check Rates In Your City On August 04
SGBs are fixed-income government securities issued in India, denominated in grams of gold. These bonds provide investors with an alternative to holding physical gold. Investors purchase SGBs at the issue price in cash, and upon maturity, the bonds are redeemed for cash. The central bank acts as the issuing authority for these bonds on behalf of the government.
SGBs are issued by the government of India with a tenure of 8 years. The SGB August 2016 issue is reaching maturity, necessitating redemption. Unlike the optional redemption offered by the Reserve Bank of India at the end of the fifth year, the redemption of this bond is mandatory.
SGBs) are issued in accordance with the Government Securities Act, 2006. When an individual invests in Sovereign Gold Bonds, they receive an annual interest of 2.5 percent, with the final interest payment being made upon maturity alongside the principal amount.
Read More: Gold Rate Today: Check 22 Carat Price In Your City On August 04
Investors are provided with a Certificate of Holding as documentation of their investment. These SGBs are also convertible into demat form. Under the SGB Scheme, individuals are permitted to purchase bonds up to a maximum of 4 kg in a financial year, with the minimum investment requirement set at one gram. It is important to note that the interest earned on Gold Bonds is subject to taxation in accordance with the regulations outlined in the Income Tax Act, 1961.
On August 1, in a report by Business Today, it was highlighted that the Sovereign Gold Bond (SGB) scheme stands out as one of the costlier instruments utilized to finance the fiscal deficit. The Central government is contemplating a comprehensive evaluation to determine the future of the scheme.
According to official sources, at present, the government does not have immediate plans to introduce a substitute for the SGB scheme if the decision is made to cease its operation.
The future of the scheme will be deliberated upon during a meeting scheduled in September 2024. This meeting will align with the RBI’s borrowing calendar meeting, where key decisions regarding the scheme will be taken.
The discourse during this pivotal meeting will play a vital role in shaping the trajectory of the SGB scheme, which has been instrumental in the government’s efforts to garner funds and alleviate the tangible demand for physical gold in the market.
