SGB Redemptions Gather Pace As Returns Cross 200%

Several sovereign gold bonds (SGB) have been redeemed in the month of April 2026, as some tranches offer gains higher than 200%, according to statements made by the Reserve Bank of India.

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The SGB 2020–21 Series VII and SGB 2018–19 Series II have become eligible for premature redemption this week. These redemptions are part of a broader schedule announced by the central bank.

Redemption Timeline And Eligible Series

The current round follows earlier redemptions in February, when SGB 2019–20 Series IX and SGB 2020–21 Series V were opened for early exit. The rate of redemptions has escalated in April, and there will be more tranches in the coming weeks, which include SGB 2020-21 Series I and SGB 2019-20 Series VI.

SGBs have a tenure of eight years, although it is possible to redeem them earlier after five years. The redemption amount is determined from the simple average of the closing price of 999 purity gold for the last three working days, according to RBI instructions.

Returns Reflect Surge In Gold Prices

For the SGB 2020–21 Series VII, the redemption price has been set at ₹15,554 per unit for April 20, 2026. The issue price for this tranche was ₹5,051 per unit.

This translates to an absolute return of over 200%, excluding the 2.5% annual interest paid on these bonds, based on RBI data.

The increase in returns corresponds with the rise in gold prices over the past five years. Since SGBs are linked to the market price of gold, redemption values have increased in line with bullion prices.

No Fresh Issuances Since FY24

In 2024, the RBI ceased the issuance of sovereign gold bonds. There haven't been any fresh issues of these bonds in the past two financial years, nor has anything been announced about fresh issues in FY27.

According to market participants cited by Reuters, the scheme was paused as it became a relatively expensive borrowing instrument for the government.

Structure And Pricing Mechanism

The SGBs are provided by the central bank, in the name of the Government of India, and are valued in grams of gold. Additionally, investors receive a guaranteed annual return rate of 2.5% of their principal amount invested.

The redemption price formula provides an adjustment for any change in the market gold price, as it has experienced substantial growth since several of these bonds were issued from 2018 to 2021.
Ongoing Redemptions till FY27

Several more SGB issues will be eligible for premature redemption till FY27, depending on the issuance schedule of earlier issues.

The continued redemptions reveal the systematic process of maturity of the SGBs due to increased gold prices.