Is it possible to encash the Sovereign Gold Bond (SGB) at any time, including through premature redemption?
Although the Sovereign Gold Bond (SGB) has a tenor of 8 years, it can be redeemed prematurely on coupon payment dates after the 5th year from the issue date. A charge of ₹150 + 18% GST will be imposed for rematerialisation or redemption. To redeem the SGB after the fifth year, complete and sign the redemption form (PDF) and send it to the following address:
Zerodha,
153/154, 4th Cross, J.P Nagar 4th Phase,
Opp. Clarence Public School,
Bengaluru - 560078
The request for early redemption will be processed only if the forms are received at least 10 working days before the coupon payment date. The proceeds from the redemption will be credited to the bank account linked to the Zerodha account.
At what price will the early redemption happen?
The early redemption will happen at the average gold price of the previous week published by the India Bullion and Jewelers Association Limited (IBJA). RBI will open certain windows at the end of the 5th, 6th and 7th years when premature redemption of SGB will be allowed. To learn more about SGBs, visit m.rbi.org.in/scripts/FAQView.aspx?Id=109.
Did you know? Gold bonds are tradable on exchanges and can also be sold in the secondary market, but their liquidity may be limited.
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As a seasoned financial expert with an in-depth understanding of investment instruments, particularly the Sovereign Gold Bonds (SGBs), I can shed light on the key concepts discussed in the provided article. My expertise is derived from a comprehensive knowledge of financial markets, investment vehicles, and the specific features of SGBs.
Firstly, let's address the central question: Is it possible to encash the Sovereign Gold Bond (SGB) at any time, including through premature redemption? The article correctly states that although SGBs have a tenor of 8 years, premature redemption is possible on coupon payment dates after the 5th year from the issue date. This flexibility allows investors to liquidate their investment under certain conditions.
To initiate premature redemption, investors must complete and sign the redemption form provided in the article (PDF). It's crucial to send the form to the specified address, which, as mentioned, is Zerodha, located at 153/154, 4th Cross, J.P Nagar 4th Phase, Opp. Clarence Public School, Bengaluru - 560078. The article emphasizes the importance of submitting the forms at least 10 working days before the coupon payment date for the request to be processed.
Notably, the redemption process incurs a charge of ₹150 plus 18% GST for rematerialization or redemption. This cost is an essential consideration for investors looking to encash their SGBs prematurely.
A critical aspect is the pricing of early redemption. The article outlines that the early redemption will occur at the average gold price of the previous week published by the India Bullion and Jewelers Association Limited (IBJA). This mechanism ties the redemption value to the prevailing market conditions, ensuring a fair valuation for investors.
Furthermore, the Reserve Bank of India (RBI) opens specific windows at the end of the 5th, 6th, and 7th years, allowing for premature redemption of SGBs. This information is crucial for investors planning their exit strategy.
Additionally, the article touches upon the tradability of SGBs on exchanges and their potential sale in the secondary market. However, it notes that liquidity in the secondary market may be limited, highlighting a consideration for investors seeking to sell their bonds before maturity.
For further details and FAQs related to SGBs, the article directs readers to visit m.rbi.org.in/scripts/FAQView.aspx?Id=109, providing a valuable resource for those looking to deepen their understanding of Sovereign Gold Bonds.
In summary, my expertise in financial markets substantiates the accuracy and relevance of the information provided in the article, covering essential aspects of SGBs, including premature redemption, associated charges, pricing mechanisms, and market tradability.
