RBI announces redemption of SGB 2017–18 Series III

Mumbai, Nov 02

The Reserve Bank of India (RBI) has announced the final redemption for the Sovereign Gold Bonds (SGB) 2017-18 Series III with an issue price of Rs 2,866 per gram, resulting in an absolute return of about 338 per cent plus 2.5 per cent of annual interest for investors over the 8-year tenure ending October 16.

Talking to Bizz Buzz, Dr Madhavankutty, Chief Economist at Canara Bank says, “In past decade gold prices have gone up by 450 per cent cumulatively.”

This along with rupee depreciation has led to handsome returns. Recent news flow regarding a probable fed rate cuts also helped a rally in gold prices.

MV Hariharan, former treasury head of SBI says, “My personal view is that central bank gold holdings are at record highs as collateral in case the good faith argument for printing notes is discounted by markets. So, kind of back door gold collateralizarion especially by the Fed.”

Also, gold ETFs are much sought after within investors including roll over on expiring futures contract, he said.

Gold is no more a much-maligned Wall Street term “fear hedge”.

Taking a cue from this development, banks are planning to get more aggressive on the gold loan front.

A Federal Bank spokesperson said that the bank has witnessed 11 per cent QoQ growth on the front and “it has given us headroom to go for more gold loans at a higher price.”

Upon redemption on October 16, 2025, the RBI fixed the final price at ₹12,567 per unit, based on the average gold price published by the India Bullion and Jewellers Association (IBJA) for the three preceding business days.

This price means a capital appreciation of ₹9,701 per unit, not including the separate 2.5% annual interest paid throughout the holding period.

Anil Kumar Bhansali, Head of Treasury at Finrex, says, “SGBs provide a secure, paper/demat alternative to physical gold investment, including both capital gain linked to gold price and fixed annual interest.”

Investors also benefit from no capital gains tax on redemption at maturity, as per the current tax laws.

Redemption price is calculated as the simple average of gold of 999 purity for the three business days before the redemption date, as per RBI guidelines.

Investors are allowed to redeem SGBs after 5 years, only on interest payout dates, but the best returns are seen at the 8-year maturity.

This 338 per cent return milestone highlights the substantial appreciation in gold over the past 8 years and demonstrates the effectiveness of SGBs as a gold investment avenue with government backing.