108% return on Sovereign Gold Bonds: RBI announces premature redemption price of this SGB series

The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bonds (SGB 2020-21 Series-VI-issue date September 8, 2020). The option to prematurely redeem these SGBs will be available on September 6, 2025, with September 7 and 8 being holidays), the RBI said in a statement The tenure of sovereign gold bonds (SGBs) is eight years. However, the premature redemption of SGBs is permitted only after the fifth year from the date of issue.

Sovereign Gold Bond (SGB) scheme details

The Sovereign Gold Bond (SGB) Scheme, managed by the RBI on behalf of the Government of India, offers a secure, paper/demat alternative to holding physical gold, eliminating storage and purity concerns while paying 2.5% annual interest. The pre-mature redemption of SGBs is allowed after 5 years from the date of issue, on interest payout dates. The bonds are tradable, transferable, and can also be used as loan collateral.

Also read: Sovereign Gold Bond 2025: RBI announces SGB premature redemption dates from October 2025 – March 2026; check details

How is SGB redemption price calculated?

According to an RBI press release dated September 5, 2025, “The redemption price of SGB shall be based on the simple average of the closing gold price of 999 purity of previous three business days from the date of redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA).”

What is the redemption price of SGB 2020-21 Series-VI (issue date September 8, 2020)

The redemption price for the premature redemption of SGB 2020-21 Series-VI (issue date September 8, 2020) due on September 6, 2025, will be Rs 10,610 per unit of SGB based on the simple average of the closing gold price for the three business days i.e., September 03, September 04, and September 05, 2025, according to the press release.

The SGB 2020-21 Series-VI issue date September 8, 2020, was issued at Rs 5,117 per gram in August 2020. It will yield an absolute simple return of nearly 107.35% on the date of the premature redemption.
The absolute return comes to Rs 10,610 -Rs 5,117 = Rs 5,493 (without factoring in the interest). In percentage terms, it is 5,493 ÷ 5,117 × 100 = 107.35%.

SGB Interest payment

SGBs offer an interest rate of 2.50% (fixed rate) per annum on the initial investment amount. The interest amount is credited semi-annually to the bank account of the SGB investor. The last interest instalment is payable on maturity along with the principal.

What investors need to do for premature redemption?

Investors holding SGBs should review the redemption schedule carefully. Some of the key actions include:
a) Identify the tranche to which your bonds belong by checking the issue date.
b) Ensure that your request for premature redemption is submitted by the deadline mentioned in the schedule.