SGB Scheme 2016-17 Series IV: Last Day For Premature Sell Today, Should You Hold Or Cede?

The Reserve Bank of India (RBI) has fixed the price of premature redemption of the Sovereign Gold Bond (SGB) scheme 2016-17 (Series IV) at Rs 5077 per unit.

Those who have invested in the scheme can expect an annualised return of about 11 per cent or 75 per cent absolute return per one gram of gold. It is in addition to the half-yearly interest payment of 2.5 per cent on the scheme.

If you haven’t opted for early redemption, you will receive interest payments on September 17. The premature withdrawal request window was open from August 17 to September 7.

However, RBI would entertain requests for premature redemption at least one day before the interest payment date of September 17. But you won’t be eligible for a premature buyback after receiving the interest payment.

"Requests for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date," RBI’s FAQ read.

Nish Bhatt, founder and CEO of London-based Investment consulting firm Millwood Kane International, said, “Investment in sovereign gold bonds received a robust response. RBI has already raised over Rs. 25,702 crore from November 2015 till FY21.”

Some of the major positives of SGBs include liquidity, zero storage cost, and easy redemption than actual gold. Besides, they offer guaranteed semi-annual interest payments.

Returns From SGBs To Date

Sovereign Gold Bond (SGB) scheme 2016-17 (Series IV), which trades under the symbol ‘SGBMAR25’ on National Stock Exchange (NSE), was priced at Rs. 5092.16 per unit as of 2 pm on September 15. One unit of SGB represents one gram of gold.

The Series IV scheme was issued at Rs. 2893, with a discount of Rs. 50 for online transactions in March 2017. At the current price, it provided an absolute return of about 75 per cent or an annual return of 11 per cent.

Should You Buyback Or Hold Till Maturity?

Each SGB has a maturity period of eight years; if you sell them through the RBI's buyback window, you will incur no capital gains tax. However, the interest amount is taxable.

When the first SGB scheme was announced in November 2015, the gold rate was about Rs. 2,530 per gram. But, as of 4 pm, September 15, 2022, it was about Rs. 4,972 per gram.

Bhatt said, "In the near term, there may be some softness in gold prices as interest rates and yield rises across the globe. The long-term view remains intact, as economic uncertainty, and a rise in inflation will help gold prices."

However, past returns are no guarantee for future returns. So, Bhatt advises users to take the redemption or hold call based on their risk profile since gold is considered a haven asset during periods of economic uncertainty.

He said that the US and Europe might witness a slowdown, and therefore, the Indian economy may be subject to some spillover effects, which may impact the gold price.

How To Apply For Premature Withdrawal?

You will have to fill out the redemption or repurchase request form (RF), approach the respective bank, SHCIL office, post office, or agent, and submit the document, including your bank details. Submit it at least one day before the interest payment date. If you have further queries regarding SGBs, you can write to RBI at sgb@rbi.org.in.