Sovereign Gold Bond
Indian government security linked to Gold From Wikipedia, the free encyclopedia
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.
History
Summarize
Perspective
The scheme was initially announced in the 2015 Union budget. It was approved by the cabinet on 9th September, 2015, and was launched by Prime Minister Narendra Modi in an event in New Delhi on 5 November 2015. The event was also attended by the Union Minister for Finance Arun Jaitley, the Minister of State for Finance Jayant Sinha and the Minister of State for Commerce & Industry Nirmala Sitharaman. The Gold Monetisation Scheme, Indian Gold Coins and Sovereign Gold Bonds were all launched in the same event.[1][2][3][4]
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]
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]
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 Finance Nirmala 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]
Eligibility
People residing in India, as defined in the Foreign Exchange Management Act, 1999 are eligible to invest in SGBs. These include individuals, Hindu Undivided Families (HUFs), universities, trusts, and charitable institutions. People who become non-residents after buying an SGB can still hold it until maturity or premature redemption.
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
Summarize
Perspective
SGBs, purely as an investment format, can be compared to other forms of investing in Gold.[21]
| SGB | Physical gold | Gold ETF and mutual funds | Digital gold | |
|---|---|---|---|---|
| Storage | Stored in government facilities. Very low risk of theft. | Risk of theft | Stored in vaults. Low risk of theft[22] | Stored in vaults. Low risk of theft[23] |
| Regulated by | RBI, and by extension, Government of India | Not regulated | SEBI, and by extension, Government of India | Not regulated |
| Charges | No making charges, GST, or expense ratio | Making charges from 8% to 35%. GST of 3%. No expense ratio. | No making charges or GST. Expense ratio up to 1% is allowed. | No making charges. GST of 3% and commissions are applicable. No expense ratio. |
| Interest | Fixed at 2.5% per annum | No interest payments | No interest payments | No interest payments |
| Taxation | No tax on capital gains. Interest is taxed at slab.[24][25] | Tax on capital gains | Tax on capital gains | Tax on capital gains |
| Liqudity | Can be sold on stock exchanges if held in demat form. Can be sold back to the RBI at specified intervals. | Can be sold physically to jewelers anytime | Units can be sold back to the asset management company | Can be liquidated instantly |
Issue history
| # | Tranche | ISIN | Issue Date | Issue price/unit (₹) |
Units subscribed (grams) |
Redemption price/unit (₹) |
CAGR Returns (Absolute) (%)[a] |
|---|---|---|---|---|---|---|---|
| 1 | 2015-I | IN0020150085 | 30 November 2015 | 2,684 | 913,571 | 6,132[27][28] | 10.87 (128.46) |
| 2 | 2016-I | IN0020150101 | 8 February 2016 | 2,600 | 2,869,973 | 6,271[29][30] | 11.63 (141.19) |
| 3 | 2016-II | IN0020150119 | 29 March 2016 | 2,916 | 1,119,741 | 6,601[31][32] | 10.75 (126.37) |
| 4 | 2016-17 Series I | IN0020160027 | 5 August 2016 | 3,119 | 2,953,025 | 6,938[33][34] | 10.50 (122.44) |
| 5 | 2016-17 Series II | IN0020160043 | 30 September 2016 | 3,150 | 2,615,800 | 7,517[35][36] | 10.80 (127.21) |
| 6 | 2016-17 Series III | IN0020160076 | 17 November 2016 | 3,007 | 3,598,055 | 7,788[37][38] | 12.63 (160) |
| 7 | 2016-17 Series IV | IN0020160126 | 17 March 2017 | 2,943 | 2,220,885 | ||
| 8 | 2017-18 Series I | IN0020170018 | 12 May 2017 | 2,951 | 2,027,695 | ||
| 9 | 2017-18 Series II | IN0020170034 | 28 July 2017 | 2,830 | 2,349,953 | ||
| 10 | 2017-18 Series III | IN0020170059 | 16 October 2017 | 2,956 | 264,815 | ||
| 11 | 2017-18 Series IV | IN0020170067 | 23 October 2017 | 2,987 | 378,945 | ||
| 12 | 2017-18 Series V | IN0020170075 | 30 October 2017 | 2,971 | 174,024 | ||
| 13 | 2017-18 Series VI | IN0020170083 | 6 November 2017 | 2,945 | 153,356 | ||
| 14 | 2017-18 Series VII | IN0020170091 | 13 November 2017 | 2,934 | 175,121 | ||
| 15 | 2017-18 Series VIII | IN0020170109 | 20 November 2017 | 2,961 | 135,666 | ||
| 16 | 2017-18 Series IX | IN0020170117 | 27 November 2017 | 2,964 | 105,512 | ||
| 17 | 2017-18 Series X | IN0020170125 | 4 December 2017 | 2,961 | 107,380 | ||
| 18 | 2017-18 Series XI | IN0020170133 | 11 December 2017 | 2,952 | 81,614 | ||
| 19 | 2017-18 Series XII | IN0020170141 | 18 December 2017 | 2,890 | 111,218 | ||
| 20 | 2017-18 Series XIII | IN0020170158 | 26 December 2017 | 2,866 | 131,958 | ||
| 21 | 2017-18 Series XIV | IN0020170166 | 1 January 2018 | 2,881 | 327,434 | ||
| 22 | 2018-19 Series I | IN0020180033 | 4 May 2018 | 3,114 | 650,337 | ||
| 23 | 2018-19 Series II | IN0020180249 | 23 October 2018 | 3,146 | 312,258 | ||
| 24 | 2018-19 Series III | IN0020180314 | 13 November 2018 | 3,183 | 409,398 | ||
| 25 | 2018-19 Series IV | IN0020180389 | 1 January 2019 | 3,119 | 207,886 | ||
| 26 | 2018-19 Series V | IN0020180462 | 22 January 2019 | 3,214 | 243,606 | ||
| 27 | 2018-19 Series VI | IN0020180561 | 12 February 2019 | 3,326 | 207,388 | ||
| 28 | 2019-20 Series I | IN0020190073 | 11 June 2019 | 3,196 | 459,789 | ||
| 29 | 2019-20 Series II | IN0020190081 | 16 July 2019 | 3,443 | 535,947 | ||
| 30 | 2019-20 Series III | IN0020190107 | 14 August 2019 | 3,499 | 1,024,837 | ||
| 31 | 2019-20 Series IV | IN0020190115 | 17 September 2019 | 3,890 | 627,892 | ||
| 32 | 2019-20 Series V | IN0020190370 | 15 October 2019 | 3,788 | 455,776 | ||
| 33 | 2019-20 Series VI | IN0020190388 | 30 October 2019 | 3,835 | 693,210 | ||
| 34 | 2019-20 Series VII | IN0020190461 | 10 December 2019 | 3,795 | 648,304 | ||
| 35 | 2019-20 Series VIII | IN0020190537 | 21 January 2020 | 4,016 | 522,119 | ||
| 36 | 2019-20 Series IX | IN0020190545 | 11 February 2020 | 4,070 | 405,957 | ||
| 37 | 2019-20 Series X | IN0020190552 | 11 March 2020 | 4,260 | 757,338 | ||
| 38 | 2020-21, Series I | IN0020200062 | 28 April 2020 | 4,639 | 1,772,874 | ||
| 39 | 2020-21, Series II | IN0020200088 | 19 May 2020 | 4,590 | 2,544,294 | ||
| 40 | 2020-21, Series III | IN0020200104 | 16 June 2020 | 4,677 | 2,388,328 | ||
| 41 | 2020-21, Series IV | IN0020200146 | 14 July 2020 | 4,852 | 4,130,820 | ||
| 42 | 2020-21, Series V | IN0020200161 | 11 August 2020 | 5,334 | 6,349,781 | ||
| 43 | 2020-21, Series VI | IN0020200195 | 8 September 2020 | 5,117 | 3,190,133 | ||
| 44 | 2020-21, Series VII | IN0020200203 | 20 October 2020 | 5,051 | 1,859,518 | ||
| 45 | 2020-21, Series VIII | IN0020200286 | 18 November 2020 | 5,177 | 1,573,457 | ||
| 46 | 2020-21, Series IX | IN0020200377 | 5 January 2021 | 5,000 | 2,869,886 | ||
| 47 | 2020-21, Series X | IN0020200385 | 19 January 2021 | 5,104 | 1,214,048 | ||
| 48 | 2020-21, Series XI | IN0020200393 | 9 February 2021 | 4,912 | 1,227,915 | ||
| 49 | 2020-21, Series XII | IN0020200427 | 9 March 2021 | 4,662 | 3,230,907 | ||
| 50 | 2021-22, Series I | IN0020210053 | 25 May 2021 | 4,777 | 5,318,973 | ||
| 51 | 2021-22, Series II | IN0020210061 | 1 June 2021 | 4,842 | 1,898,475 | ||
| 52 | 2021-22, Series III | IN0020210087 | 8 June 2021 | 4,889 | 1,479,232 | ||
| 53 | 2021-22, Series IV | IN0020210111 | 20 July 2021 | 4,807 | 2,923,762 | ||
| 54 | 2021-22, Series V | IN0020210129 | 17 August 2021 | 4,790 | 2,292,743 | ||
| 55 | 2021-22, Series VI | IN0020210145 | 7 September 2021 | 4,732 | 3,520,341 | ||
| 56 | 2021-22, Series VII | IN0020210178 | 2 November 2021 | 4,761 | 3,248,238 | ||
| 57 | 2021-22, Series VIII | IN0020210228 | 7 December 2021 | 4,791 | 2,480,493 | ||
| 58 | 2021-22, Series IX | IN0020210236 | 18 January 2022 | 4,786 | 2,333,188 | ||
| 59 | 2021-22, Series X | IN0020210319 | 8 March 2022 | 5,109 | 1,539,694 | ||
| 60 | 2022-23, Series I | IN0020220045 | 28 June 2022 | 5,091 | 2,557,864 | ||
| 61 | 2022-23, Series II | IN0020220078 | 30 August 2022 | 5,197 | 3,360,408 | ||
| 62 | 2022-23, Series III | IN0020220110 | 27 December 2022 | 5,409 | 2,811,010 | ||
| 63 | 2022-23, Series IV | IN0020220169 | 14 March 2023 | 5,611 | 3,531,586 | ||
| 64 | 2023-24, Series I | IN0020230069 | 27 June 2023 | 5,926 | 7,769,290 | ||
| 65 | 2023-24, Series II | IN0020230093 | 20 September 2023 | 5,923 | 11,673,960 | ||
| 66 | 2023-24, Series III | IN0020230168 | 28 December 2023 | 6,199 | 12,106,807 | ||
| 67 | 2023-24, Series IV | IN0020230184 | 21 February 2024 | 6,263 | 12,785,729 | ||
| Total | 146961537 (~147 tons) | ||||||
- 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]
References
External links
Further reading
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