The Reserve Bank of India (RBI) has announced the premature redemption of the Sovereign Gold Bond (SGB) 2020-21 Series VI, issued in September 2020. Eligible investors will receive a 108% return on September 6, 2025, according to the central bank’s notification.
Sovereign Gold Bonds: What Are They?
Sovereign Gold Bonds are government securities denominated in grams of gold. Launched in 2015, they were designed to reduce India’s reliance on physical gold imports while offering investors a secure, interest-bearing alternative.
Each bond has an eight-year tenure, with early redemption allowed after the fifth year. Investors also receive 2.5% annual interest, payable semi-annually.
RBI’s Announcement and Redemption Price
The RBI stated that holders of the 2020-21 Series VI, issued on September 8, 2020, may redeem their investments early on September 6, 2025. The redemption price is calculated based on the average closing gold price of 999 purity gold, published by the India Bullion and Jewellers Association (IBJA), over the three business days prior to the redemption date.
According to RBI, this method yields a redemption price that secures investors a 108% capital return, excluding the regular interest payments.
Investor Returns from Past Tranches
This is not the first time investors have seen strong returns on premature redemption.
- The 2018-19 Series V, redeemed in July 2025, delivered gains of 205%, according to data published in the Economic Times.
- Bonds from the 2017 tranches offered even higher yields, exceeding 220% returns.
Such outcomes underscore gold’s role as a hedge against inflation and currency fluctuations, particularly during times of economic uncertainty.
How Investors Can Redeem
Investors wishing to redeem must approach the bank, post office, or stock-holding institution through which the bonds were purchased. According to RBI guidelines, redemption proceeds, including the final interest instalment, will be credited directly to the investor’s bank account.
Financial advisers caution that while early redemption secures current gains, waiting until the full eight-year maturity could provide tax benefits, as capital gains on maturity are exempt. Early redemption gains may attract taxation under applicable income tax laws.
Expert Perspectives
Ajay Kedia, Director of Kedia Commodities, told the Business Standard that gold prices have steadily increased over the past five years, driven by global economic volatility. “The 108% return reflects not only price growth but also investor confidence in sovereign-backed securities,” he said.
Dr. Radhika Pandey, Senior Fellow at the National Institute of Public Finance and Policy (NIPFP), emphasised the policy objective. “By offering competitive returns, SGBs reduce household demand for physical gold, thereby helping to manage India’s current account deficit,” she explained.
Wider Economic Context
India is one of the world’s largest consumers of gold, with annual demand exceeding 700 tonnes, according to the World Gold Council. Reducing physical imports remains a key goal for policymakers, as gold imports widen the trade deficit and weaken the rupee.
SGBs allow investors to benefit from rising gold prices without contributing to import pressures. The latest redemption announcement, delivering more than double returns in just five years, may further boost interest in future bond issuances.
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Conclusion
The RBI’s announcement provides an opportunity for investors in the SGB 2020-21 Series VI to lock in 108% returns ahead of maturity. While early redemption offers immediate gains, financial experts urge investors to weigh tax implications and long-term benefits before making a decision.
