India's Sovereign Gold Bond Offers 193% Return in 8 Years, Investors Set to Benefit

Investors in Sovereign Gold Bonds (SGBs) 2016-17 Series IV and 2019-20 Series IV can expect significant returns due to rising gold prices. The RBI has announced the final redemption price, with the 2016-17 Series IV bonds set to be redeemed at Rs 8,624 per gram, offering a 193% return. The 2019-20 Series IV bonds will be redeemed at Rs 8,634 per gram. The redemption process allows investors to exit early, but experts suggest holding SGBs until maturity for tax-free gains, guaranteed interest, market-linked returns, safety, and no storage costs.

The Indian government's Sovereign Gold Bonds (SGBs) have gained popularity among investors due to their unique features and potential returns. The latest series, SGB 2016-17 Series IV and SGB 2019-20 Series IV, have recently undergone final redemption, offering investors substantial gains [1].

Investors in these series can expect significant returns, primarily due to the rising gold prices. The RBI announced the final redemption price for SGB 2016-17 Series IV at Rs 8,624 per gram, representing a 193% return for investors. Likewise, SGB 2019-20 Series IV was redeemed at Rs 8,634 per gram, offering a 154% return [1].

The redemption process for SGBs is designed to provide flexibility for investors while ensuring tax benefits and guaranteed returns. Although these bonds are listed on stock exchanges, they are thinly traded, making the buyback facility an essential exit window. The RBI offers the opportunity for investors to redeem their units at the end of the fifth, sixth, and seventh years [1].

SGBs were first introduced in November 2015 and have since been issued in 67 tranches. The latest redemption process, which began in October 2024 and will continue until March 2025, will see the redemption of 30 SGB series [1].

Investors who wish to make a premature exit can submit their redemption requests through RBI's receiving offices, NSDL, CDSL, or the RBI Retail Direct platform [1]. It is essential to initiate the redemption process at least ten days before the interest payment date and one month before the coupon [1].

The performance of SGBs has been impressive, with an extended internal rate of return (XIRR) of 14.5% for SGB 2016-17 Series IV and 15.7% for SGB 2019-20 Series IV, adjusted for coupon payments [1]. These returns make SGBs an attractive investment option for those seeking a combination of safety, market-linked returns, and tax benefits.

References:
[1] Moneycontrol. (2024, September 20). Sovereign Gold Bonds up for early redemption: Find out how much you have earned. https://www.moneycontrol.com/news/business/personal-finance/sovereign-gold-bonds-up-for-early-redemption-find-out-how-much-you-have-earned-12823821.html