The Sovereign Gold Bond (SGB) Scheme, launched by the government in 2015, provides an alternative for investors looking to invest in physical gold.
However, if you’re eagerly waiting for a new installment of SGB, this update might leave you disappointed.
According to sources, the government is showing little interest in issuing a new SGB installment, although no official statement has been made. There are several reasons behind this decision.
Why the Delay in Issuing New SGB Installments?
The government is hesitant to issue a new Sovereign Gold Bond installment for multiple reasons.
One significant factor is the higher cost of raising money through SGB compared to other forms of government borrowing.
Additionally, the government views SGB as a financial investment tool rather than a social security scheme, meaning that it does not justify the higher expenses associated with it.
Secondary Market Options for SGB Investors
For those waiting to invest in SGBs, experts suggest looking to the secondary market.
Existing installments of SGB are traded on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
The government’s reduced interest in issuing new SGBs is also attributed to the rising price of gold over the last decade, which increases the cost of redeeming bonds at maturity.
Overview of Past SGB Issuances
Since the inception of the scheme, the Reserve Bank of India (RBI) has issued 67 installments of Sovereign Gold Bonds.
To date, investors have poured Rs 72,274 crore into these bonds. The government has already matured four installments and made payments to those investors.
The financial burden of these payments has increased significantly, with the government allocating Rs 2,424 crore to the Gold Reserve Fund in FY23, which surged to Rs 8,551 crore in FY25, marking a 250 percent rise.
Purpose of the SGB Scheme
The SGB Scheme was introduced to reduce the demand for physical gold, which requires the government to import large quantities, affecting foreign exchange reserves.
By offering SGBs, the government aims to provide an investment alternative, helping curb the need for excessive gold imports.
Maturity and Returns on SGB
Sovereign Gold Bonds are issued by the RBI on behalf of the government and have an 8-year maturity period.
Investors earn an annual interest of 2.5 percent on their investment, and at maturity, the government repays them based on the prevailing market rate of gold.
