End of an Era for SGB Investors

The Sovereign Gold Bond (SGB) scheme, a popular investment alternative to physical gold, is now coming to an end. On February 1, 2025, during a post-budget media briefing, Finance Minister Nirmala Sitharaman confirmed that no new SGBs would be issued. In a carefully worded response—“Yes, in a way”—she indicated that the scheme had effectively reached its conclusion. The last tranche of SGBs for the 2023-24 series was available for subscription from February 12 to February 16, 2024, at an issue price of ₹6,262 per gram.

A Brief History of Sovereign Gold Bonds

Launched in November 2015, the SGB scheme was designed to offer investors a safe, paper-based alternative to buying physical gold. The bonds provided an annual interest rate of 2.75% initially, later revised to 2.5%, making them a lucrative option. With an eight-year maturity period and an early exit option after five years, SGBs balanced long-term security with liquidity.

One of the major attractions of SGBs was their high return potential, reaching up to 9-11% in some cases. Investors who purchased them online also enjoyed a ₹50 discount per gram, adding a small but meaningful incentive.

Why Has the Government Pulled the Plug?

Despite its investor appeal, the SGB scheme became a growing fiscal burden. The combination of guaranteed interest payments and capital appreciation made it expensive for the government to sustain. Additionally, a reduction in gold import duties shifted investor interest back to physical gold, diminishing the need for a paper-based alternative.

Originally, SGBs were introduced to curb gold imports and allow the government to borrow at lower costs. However, they captured only about 2-3% of India’s annual gold import bill, failing to make a significant impact. Given the persistently high gold prices over the last several years, borrowing through SGBs became increasingly costly. With no new issuances in the past year, the government has now made the decision final—no fresh SGBs will be introduced in the future.

What This Means for Fiscal Policy

The discontinuation of SGBs signals a strategic shift in India’s fiscal approach. Managing national debt and financial instruments requires balancing investor benefits with long-term economic sustainability. By retiring an expensive scheme, the government is likely paving the way for more cost-effective financial products that align with India’s evolving economic priorities.

While some investors may be disappointed, this move underscores a commitment to fiscal prudence. The government now has the opportunity to introduce newer, more sustainable investment options.

What Happens to Your Existing SGBs?

If you currently hold SGB (gold bond), there is no need to worry. The government has assured investors that all existing benefits will remain unchanged. Interest payments will continue as scheduled, and at maturity, your redemption value will be based on the prevailing gold price. Additionally, the maturity proceeds remain fully tax-exempt, ensuring a smooth and profitable exit.

Looking Ahead

The end of the SGB bonds scheme marks the close of an innovative investment chapter. However, change is a constant in financial markets. As India navigates its economic future, investors should stay informed and adaptable. The discontinuation of SGBs may open doors to new financial products that better align with today’s fiscal realities.

For investors, this is a reminder that investment strategies must evolve with market shifts. While SGBs may be fading out, opportunities for smart investing remain plentiful. The key is to align financial choices with both personal goals and the nation’s broader economic direction.