Union Government Discontinues Sovereign Gold Bonds

The Union government discontinued the Sovereign Gold Bond (SGB) Scheme because it was expensive. Although SGBs worked well for investors, they became very high-cost borrowing for the government.  

Let’s take the first batch of Sovereign Gold Bonds from 2015, which matured in 2023, as an example. The government raised Rs. 245 crores in this tranche when gold was priced at Rs. 2,684 per gram. Cut to 2023, gold prices have jumped to Rs. 6,132 per gram, a massive 128% increase. As a result, the RBI had to pay you the higher gold price along with the interest earned. 

What are Sovereign Gold Bonds (SGBs)

The Sovereign Gold Bonds (SGBs), a government-backed scheme started in 2015 to reduce gold imports under the Gold Monetisation Scheme, have gained significant popularity over time. SGBs are a way to invest in gold without actually purchasing it. Over the years, Indians invested Rs. 72,274 crores in SGBs through 67 tranches. 

Why did the Government Introduce SGBs?

India imports a lot of gold, which worsens the Current account deficit (CAD)—the gap between what India earns and spends in foreign currency. The government introduced SGBs to shift people from physical gold to bonds, saving storage costs and boosting financial investments. The government could use the money raised to finance its expenses,  expecting this to be cheaper than borrowing through regular government bonds.   

Also Read: India’s Union Budget 2025-26

No New Issues After FY 2023

There were speculations that the government might discontinue the Sovereign Gold Bonds (SGBs) as no new bonds were issued after the financial year 2023.  The Reserve Bank of India last issued the Sovereign Gold Bonds (SGBs) in February 2023. Since the scheme started, the overall amount issued is Rs. 45,243 crore (as of Financial Year 2023), while the outstanding amount was Rs 4.5 lakh crore in March 2023.

Why did the Government Discontinue SGBs?

The union government focuses on reducing debt and strengthening the country’s economic position. It aims to lower the debt-to-GDP ratio from 58.2% in the financial year 2024 to 56.8% by the Financial Year 2025 and in the following years. Since SGBs contribute to the government’s debt, they are becoming an unsustainable option. 

Moreover, in the financial year 2025 budget, the government reduced the gold import duty from 15% to only 6% signaling a strategic shift toward addressing gold-related issues through alternative solutions rather than depending on Sovereign Gold Bonds (SGBs). 

Even though the Financial Year 2025 Budget allocated Rs 18,500 crore for SGBs, down from Rs 26,852 crore in the interim Budget, no new SGBs have been issued in the current fiscal year. Now that the scheme has been discontinued, investors might need to look for other gold investment choices.