Due to the sharp rise in gold prices, Sovereign Gold Bonds became a treasure trove for investors. However, because of this, the government had to close the scheme. Although the bonds were very valuable for investors, they were becoming a burden on the government’s treasury. Take a look at the answers to all your questions related to SGB (Sovereign Gold Bonds).
What Are Sovereign Gold Bonds (SGB)?
Sovereign Gold Bonds (SGB) are securities issued by the government in grams of gold. Launched in 2015, these bonds provide a better alternative to holding physical gold. SGBs are available for subscription in different installments, and investors can buy them during these periods.
- The redemption price of SGBs is linked to the current market price of gold.
- Investors also receive 2.5% interest per year, paid every six months.
- These bonds mature in 8 years and are tax-free if held until maturity.
- Early redemption is allowed after 5 years.
Why Was the SGB Scheme Discontinued?
The Finance Ministry stated in Parliament that SGBs were discontinued due to:
- Gold price fluctuations
- Increased borrowing costs due to global economic challenges
The first installment was launched in November 2015, while the last one was in February 2024. The final maturity for the last installment will be in February 2032.
How Many Installments Were Issued?
- The government issued a total of 67 installments.
- 7 installments have been fully redeemed after completing their 8-year period.
- 60 installments are yet to be redeemed.
- The government raised ₹72,274 crore from these 67 installments.
- Investors received good returns in the fully redeemed installments
How Much Profit Did Investors Make?
If we compare the issue price and redemption price, it is clear that investors earned huge returns.
SGB Redemption Prices (₹ per gram)
| Tranche | Issue Price | Redemption Price | Profit % |
|---|---|---|---|
| Nov 2015 | ₹2,684 | ₹6,132 | 148% |
| Feb 2016 | ₹2,600 | ₹6,271 | 162% |
| Mar 2016 | ₹2,916 | ₹6,601 | 146% |
| Aug 2016 | ₹3,119 | ₹6,938 | 122% |
| Sep 2016 | ₹3,150 | ₹7,517 | 138% |
| Nov 2016 | ₹3,007 | ₹7,788 | 159% |
| Mar 2017 | ₹2,943 | ₹8,624 | 193% |
- The first installment was redeemed at a 148% profit.
- The second installment gave a 162% return.
- The government has so far paid ₹11,800 crore for the redemption of 7 installments.
- The government initially raised ₹4,800 crore from these 7 installments, meaning it paid 146% more than its initial inflow.
How Many Gold Bonds Are Yet to Be Redeemed?
The government has issued gold bonds equivalent to 146.96 tonnes so far.
- As of March 31, 2025, 16.96 tonnes have been redeemed.
- 130 tonnes of gold bonds are still pending redemption.
- At current gold prices, these pending bonds are worth ₹1.2 lakh crore.
SGBs have given excellent returns to investors, but they have also increased the government’s financial burden. With high redemption payouts, the scheme was discontinued to manage economic challenges.