Sovereign Gold Bond, abbreviated as SGB, is a government security issued by the Reserve Bank of India (RBI) on behalf of the Government of India. It is denominated in grams of gold and is linked to the price of gold in India. It is also an interest-bearing bond, carrying an interest of 2.5% p.a. paid in two installments every year till maturity.
The bond has an 8-year term with an option for early withdrawal through the RBI after 5 years. It is listed and traded on Indian stock exchanges, allowing eligible investors to buy or sell anytime through their demat accounts. It can also be transferred to other eligible investors without redemption through the RBI.
The scheme was discontinued in 2024 due to being an expensive method of borrowing for the government. Existing bonds were not affected.
The scheme was introduced due to a forex crisis caused by high gold imports. Most of the demand for gold in India is met through imports and it was believed that such a scheme would ultimately help in reducing the country’s current account deficit.[2][5][6]
Narendra Modi launching the Gold schemes and handing over a card to a woman in November 2015
It was first notified by the Department of Economic Affairs on 14 January 2016 under the Government Securities Act, 2006. The initial subscription allowed investors to buy a minimum of 2 grams, and a maximum of 500 grams. It was open from January 18 to January 22, 2016 and attracted ₹245.2 Cr of investments. The bonds initially paid 2.75% interest per year. This was later reduced to 2.5% per year for newer bonds.[7][8] The bonds were sold through banks, post offices and through online securities brokers which would allow investors to hold the bonds in demat form.[9][10][11]
Narendra Modi addressing at the launch of the Gold schemes
In August 2024, the investors who would have redeemed the bonds issued in August 2016 lost suffered a loss due a fall in the price of gold. This fall was linked to the slash in import duty on gold from 15% to 6% during the 2024 Union budget of India.[12]
After the final redemption of the 2016-I series, it was rumoured that the scheme was turning out to be very expensive for the Indian government, due to an unexpected rise in the prices of gold. The government also felt SGBs have also not served the purpose for which it was launched, which was to bring down gold imports by trying to move demand from physical gold to an electronic form. In addition, the RBI has not issued any new series after February 2024.[13][14] Physical gold purchases were made more attractive, by lowering their import duty from 15% to 6%.[15] After the 2025 Union budget, Minister of FinanceNirmala Sitharaman confirmed that the government had no plans of launching more tranches of SGBs. Economic Affairs Secretary Ajay Seth said that it had turned out to be a high cost method of borrowing for the government compared to traditional bonds and that they had not seen the expected reductions in import of gold. It made no fiscal sense to continue with a scheme that was not beneficial for both the government and the economy.[16][17]
The price for 10 grams of gold increased from Rs 26,300 for in 2015, to about Rs 84,450 in 2025 thus increasing the liability of the government to Rs 1.12 lakh crore, as of March 2025, with investors holding about 132 tonnes of gold in SGBs.[18]
The bonds are issued in 1-gram denominations and multiples thereof. Each eligible investor can purchase up to 4 kg per financial year. A demat account is optional; bonds can be held in dematerialized form with a securities depository or tracked by the RBI.[19]
Price
The issue price is the average closing price of 999 purity gold from the last 3 business days before the subscription period, as published by the India Bullion and Jewelers Association Limited (IBJA). The redemption price, for both early and maturity redemptions, is the average closing price from the 3 business days before repayment.[20]
Comparison with other forms of gold investments
SGBs, purely as an investment format, can be compared to other forms of investing in Gold.[21]
Comparison of SGB, physical gold, gold ETFs and mutual funds and digital gold in India
SGB
Physical gold
Gold ETF and mutual funds
Digital gold
Storage
Stored in government facilities. Very low risk of theft.
↑ CAGR calculations do not include interest payments and are post-tax, since capital gains tax arising on redemption of SGB to an individual are exempted.[24]
↑ Sabnavis, Madan (20 November 2023). "India wants gold, not gold bonds". Business Line. Archived from the original on 1 December 2023. Retrieved 26 July 2024. Sovereign gold bonds (SGBs) were introduced in the country in FY16 against the backdrop of a forex crisis, which was fuelled partly by high gold imports.
↑ Iyengar, Suresh P. (15 August 2024). "SGBs turn costly affair for govt, fail to curb imports". Business Line. Archived from the original on 21 August 2024. Retrieved 3 September 2024. The fund-raise through sovereign gold bonds (SGB) has turned out to be a costly proposition for the government as the gold prices have more than doubled compared to the issue price.
↑ "Why are SGBs giving the government second thoughts?". Finshots. 21 August 2024. Archived from the original on 3 September 2024. Retrieved 3 September 2024. The SGB scheme may have turned into a bigger challenge than the government originally planned. And if gold prices keep climbing, we won't be surprised if we just see the end of Sovereign Gold Bonds altogether.
↑ Sinha, Shishir (17 November 2024). "Sovereign gold bonds losing favour with government". The Hindu Business Line. Archived from the original on 17 November 2024. Retrieved 17 November 2024. The fate of SGB seems to have been sealed when the government lowered import duty on gold to 6 per cent from 15 per cent, making physical gold purchases more attractive than investments in SGBs.
↑ Mittal, Meghna (1 February 2025). "Centre discontinues Sovereign Gold Bond scheme due to high cost of borrowing". Moneycontrol. Archived from the original on 4 February 2025. Retrieved 5 February 2025. Finance Minister Nirmala Sitharaman confirmed the decision during the post-Budget media briefing on February 1, when asked about the future of the SGB scheme. "Yes, in a way," she said, acknowledging the discontinuation of the scheme which was launched in 2015 to curb physical gold imports. "These are the decisions which are taken with the purpose of raising borrowings from the market, for the purpose of financing the Budget, and at some point of time, whether this asset class is to be supported or not. The recent past experiences have been that this has been a rather fairly high-cost borrowing for the government. As a result, the government has chosen not to follow that path," Economic Affairs Secretary Ajay Seth explained at the briefing.
↑ Sinha, Shishir (3 February 2024). "Sovereign gold bonds benefitted individuals but not the economy, says DEA Secretary Ajay Seth". The Hindu Business Line. Archived from the original on 4 February 2025. Retrieved 5 February 2025. This may be good for people with higher levels of saving who want to diversify. But from the economy perspective, there is a hardly any gain. We import very significant part of our total consumption or the investment. This is a negative for the economy but for that individual investor, it is diversification and some returns coming up. Expectation at the time of launching the scheme was that it will moderate the import requirement. If it were to be a sizable amount out of our total import bill, it makes sense. We import about 800 tonnes in a year. If reductions were to be order of 40-50 tonnes, it makes the case. What if it is 5 or 10 tonnes? It is neither here nor there. Also, there is not much foreign exchange savings. On the other hand, this is among the costliest borrowings for the government. Otherwise, borrowings are available at 7 per cent here while the cost of gold bond is 12-15 per cent. So, neither the economy nor the government is gaining. Of course, individuals are gaining. At this point of time, it doesn't make economic or fiscal sense to continue with this. That's why no fresh issuance of gold bond has been done. But I'd just like to make one point – whatever commitment has already been made to gold bond holders will be met 100 per cent in terms of redemption and tax treatment.
↑ Das, Basundha (11 February 2024). "Sovereign Gold Bond Series IV FY24: How are SGBs taxed? Details here". Business Today (India). Archived from the original on 11 February 2024. Retrieved 20 July 2024. The interest earned from Sovereign Gold Bonds is subject to taxation as per the regulations of the IT Act, 1961. However, when an individual redeems the SGB, they are exempted from paying capital gains tax. Additionally, investors enjoy indexation benefits on long-term capital gains, whether they choose to transfer the bond to another person or not.
↑ Kaul, Abhinav (9 February 2024). "Sovereign Gold Bond 2016-I matures; gives 13.6% return and outperforms gold funds". Moneycontrol. Archived from the original on 10 May 2024. Retrieved 15 May 2024. According to a recent Reserve Bank of India (RBI) notification, the price for the final redemption was Rs 6,271 per unit of SGB, which is based on the simple average closing price of gold for the week of January 29-February 2, 2024.
↑ Prasad, Ajit (13 March 2025). "Final redemption under Sovereign Gold Bond (SGB) Scheme - Redemption Price for final redemption of SGB 2016-17 Series IV due on March 17, 2025 - RBI". Reserve Bank of India. Archived from the original on 4 May 2025. Retrieved 4 May 2025. Further, the redemption price of SGB shall be based on the simple average of closing price of gold of 999 purity of the week (Monday-Friday), preceding the date of redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA). Accordingly, the redemption price for the final redemption due on March 17, 2025, shall be ₹8,624/- (Rupees Eight Thousand Six Hundred Twenty-Four only) per unit of SGB based on the simple average of closing gold price for the week March 10 -13, 2025. (March 14, 2025 being a holiday).
↑ Kulkarni, Sneha (28 July 2025). "250% return for SGB investors: RBI issues final redemption price for maturity of Sovereign Gold Bonds 2017-18 Series II". The Economic Times. Retrieved 29 July 2025. The Reserve Bank of India has announced the redemption price for Sovereign Gold Bond 2017-18 Series-II at Rs 9,924 per gram, with final redemption due on July 28, 2025. Investors in this series, issued at Rs 2,830 per gram in 2017, have earned a return of 250.67% over eight years, excluding interest.
Saranya, S; Antony, Nittymol (16 July 2024). "Influence of Social Media on Investment Decisions of Women with Special Focus on Sovereign Gold Bonds". Artificial Intelligence (AI) and Customer Social Responsibility (CSR). Springer. pp.603–612. doi:10.1007/978-3-031-50939-1_46. ISBN978-3-031-50939-1.
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