Wave of sovereign gold bond redemptions underway with returns exceeding at least 200 percent
April 23, 2026
Multiple tranches of the SGB issuances have hit a five-year window, prompting the RBI to give early exits
A series of sovereign gold bond redemptions is taking place this week as they have become eligible for premature exits. According to releases from the Reserve Bank of India (RBI), the SGB 2020-21 Series-VII-Issue and the SGB 2018-19 Series-II-Issue are eligible for redemption for investors.
In simple words, a sovereign gold bond is an instrument issued by the central bank on behalf of the government of India. The tenure is usually eight years, with an exit option usually given after five years. Redemption prices for early exit are calculated based on a simple average of the closing price of gold of 999 purity of the previous three business days from the date of redemption.
However, it is to be noted that the scheme was discontinued from 2024 by the RBI, as the instrument was considered an expensive method of borrowing for the government. In the last two fiscal years, no fresh issue of SGBs has happened, with no announcements from the RBI as well regarding FY27.
"I don't think there will be any consideration for further fresh issuances of SGBs anymore. It's become a costly affair. They would rather let the SGBs mature and redeem the older ones," Dilip Parmar, a research analyst with HDFC Securities, said.
The SGB redemption timeline and why now?
The first wave of SGB redemptions for the year started in February, when the RBI announced the premature redemption of the 2019-20 Series IX and 2020-21 Series V. This set of redemptions has accelerated in April, with two of them announced this week itself. More redemptions are on the way, with two more slated next week, namely the 2020–21 Series I and the 2019–20 Series VI.
Moreover, it is increasingly about the returns that investors are interested in. Let’s take the example of the SGB 2020-21 Series-VII, when the redemption date was announced for April 20. The redemption price for this series is set at Rs 15,554 per unit. The issue price for this particular series was set at Rs 5,051. There is a discount of Rs 50 in the case of an online subscription.
In percentage terms, the absolute return on this set of SGBs would be over threefold, that is, a tad above 200 percent. This calculation is done without taking into account the 2.5 percent interest that has to be paid on the bond.
The reasons why investors can get such enormous returns now simply lie in the fact that the gold prices have seen a multi-fold jump since 2020.
Gold is seen as a safe-haven asset, and SGBs are linked to the market price of gold. That would also mean that redemption prices would jump in tandem. Many of these bonds, issued when gold prices were significantly lower, are now yielding multi-fold gains.
“The gold prices have exponentially moved higher in at least the last five years, prompting the RBI to give an early exit for investors. The prices have been reflected in whatever the spot prices have moved. But because of the overall increase in the bullion prices, it became difficult for the government to adjust to the costs accordingly, and hence SGB issuances have come to a halt,” Parmar said.
More tranches may become eligible for premature redemption through FY27 as well, suggesting that this current trend is likely to continue.
In simple words, a sovereign gold bond is an instrument issued by the central bank on behalf of the government of India. The tenure is usually eight years, with an exit option usually given after five years. Redemption prices for early exit are calculated based on a simple average of the closing price of gold of 999 purity of the previous three business days from the date of redemption.
However, it is to be noted that the scheme was discontinued from 2024 by the RBI, as the instrument was considered an expensive method of borrowing for the government. In the last two fiscal years, no fresh issue of SGBs has happened, with no announcements from the RBI as well regarding FY27.
"I don't think there will be any consideration for further fresh issuances of SGBs anymore. It's become a costly affair. They would rather let the SGBs mature and redeem the older ones," Dilip Parmar, a research analyst with HDFC Securities, said.
The SGB redemption timeline and why now?
The first wave of SGB redemptions for the year started in February, when the RBI announced the premature redemption of the 2019-20 Series IX and 2020-21 Series V. This set of redemptions has accelerated in April, with two of them announced this week itself. More redemptions are on the way, with two more slated next week, namely the 2020–21 Series I and the 2019–20 Series VI.
Moreover, it is increasingly about the returns that investors are interested in. Let’s take the example of the SGB 2020-21 Series-VII, when the redemption date was announced for April 20. The redemption price for this series is set at Rs 15,554 per unit. The issue price for this particular series was set at Rs 5,051. There is a discount of Rs 50 in the case of an online subscription.
In percentage terms, the absolute return on this set of SGBs would be over threefold, that is, a tad above 200 percent. This calculation is done without taking into account the 2.5 percent interest that has to be paid on the bond.
The reasons why investors can get such enormous returns now simply lie in the fact that the gold prices have seen a multi-fold jump since 2020.
Gold is seen as a safe-haven asset, and SGBs are linked to the market price of gold. That would also mean that redemption prices would jump in tandem. Many of these bonds, issued when gold prices were significantly lower, are now yielding multi-fold gains.
“The gold prices have exponentially moved higher in at least the last five years, prompting the RBI to give an early exit for investors. The prices have been reflected in whatever the spot prices have moved. But because of the overall increase in the bullion prices, it became difficult for the government to adjust to the costs accordingly, and hence SGB issuances have come to a halt,” Parmar said.
More tranches may become eligible for premature redemption through FY27 as well, suggesting that this current trend is likely to continue.