Gold Bond Investors to Get 333% Returns on December 2017 Issue
In a significant development, the Reserve Bank of India (RBI) has announced the final redemption price of ₹12,801 for Sovereign Gold Bonds (SGBs) under the 2017-18 Series-XI, which was issued on December 11, 2017. This news has sent a wave of excitement among investors who had purchased these bonds, as they are set to receive a whopping return of around 333% on their investment. In this blog post, we will delve into the details of this announcement, its implications for investors, and the broader context of the gold bond market in India.
For those who may not be familiar, Sovereign Gold Bonds are a type of investment instrument introduced by the Government of India in 2015, with the objective of reducing the demand for physical gold and encouraging investors to buy gold in a non-physical form. These bonds are denominated in grams of gold and are issued by the RBI on behalf of the government. The bonds have a tenure of eight years, with an option to exit after the fifth year.
The December 2017 issue of SGBs, which is the focus of this announcement, was priced at ₹2,954 per unit, with each unit equivalent to one gram of gold. At the time of issue, the price was linked to the prevailing market price of gold, and investors who purchased these bonds were essentially buying gold in a paper form. Over the years, the price of gold has fluctuated, and the redemption price of the bonds has been adjusted accordingly.
Now, with the RBI announcing a final redemption price of ₹12,801 for these bonds, investors who had purchased them at ₹2,954 per unit are set to receive a return of around 333%. This translates to a significant windfall for investors, who will receive a lump sum payment of ₹12,801 per unit, compared to their initial investment of ₹2,954 per unit.
But what does this mean for investors, and how can they benefit from this announcement? Firstly, it’s essential to note that the redemption price announced by the RBI is applicable only to the specific series of bonds issued in December 2017. Investors who hold these bonds will receive the redemption price of ₹12,801 per unit, which will be paid out to them on the maturity date.
Secondly, the RBI has also announced that the same redemption price of ₹12,801 will be applicable for premature redemption of SGBs issued under the 2019-20 Series I, which had an issue date of June 11, 2019. This means that investors who hold these bonds and wish to exit before maturity can do so at the same price, which is significantly higher than the issue price.
The implications of this announcement are significant, not just for investors who hold these bonds but also for the broader gold bond market in India. The SGB scheme has been a successful initiative, with the government issuing several tranches of bonds over the years, attracting billions of dollars in investment. The high returns offered by these bonds have made them an attractive option for investors looking to diversify their portfolios and hedge against market volatility.
Moreover, the SGB scheme has helped to reduce the demand for physical gold, which has been a significant contributor to India’s trade deficit. By encouraging investors to buy gold in a non-physical form, the government has been able to reduce the outflow of foreign exchange and promote a more stable and sustainable financial system.
In conclusion, the RBI’s announcement of the final redemption price of ₹12,801 for SGBs issued in December 2017 is a significant development that will benefit investors who hold these bonds. With returns of around 333%, these bonds have offered a lucrative investment opportunity for those who invested in them. As the gold bond market continues to evolve, it will be interesting to see how investors respond to this announcement and how the government and RBI will continue to promote the SGB scheme as a viable investment option.
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