The Sovereign Gold Bond (SGB) scheme, introduced in 2015 to curb physical gold imports, will reportedly be discontinued from the next financial year (2025-26), as the government shifts focus to reducing its debt-to-GDP ratio.
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A senior government official, cited in a Business Standard report, has stated that the scheme has “outlived its purpose” and adds to the government’s fiscal burden. “The government is obligated to repay SGB investors the gold-equivalent value at maturity, increasing liabilities. The regular interest payments further strain fiscal resources. With plans to sustainably reduce the debt-to-GDP ratio from FY27, continuing the scheme is unnecessary,” the official noted.
Finance Minister Nirmala Sitharaman is expected to outline the debt reduction strategy in the FY26 Budget. In her July Budget speech, Sitharaman reaffirmed the government’s commitment to fiscal consolidation, aiming for a fiscal deficit below 4.5 percent in FY26 and a declining debt-to-GDP ratio from FY27. The debt-to-GDP ratio is projected to fall to 56.8 percent in FY25 from 58.2 percent in FY24.
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No new SGBs have been issued in FY25, despite a Rs 18,500 crore allocation in the FY25 Budget, down from Rs 26,852 crore in the interim Budget. The Reserve Bank of India (RBI) last issued SGBs in February 2023, amounting to Rs 8,008 crore.
The total issuance under the SGB scheme stood at Rs 45,243 crore as of FY23, with an outstanding amount of Rs 4.5 trillion by March 2023. To ease its financial burden, the RBI announced early redemption for bonds issued between May 2017 and March 2020.
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Launched in November 2015, SGBs aimed to shift retail investors from physical gold to paper gold. The bonds have an eight-year maturity period, with partial redemption allowed after five years. Interest rates were initially set at 2.75 percent, later reduced to 2.5 percent.
The FY25 Budget also cut the gold import duty from 15 percent to 6 percent to curb smuggling, signaling the government’s pivot away from the SGB scheme while addressing other challenges in the gold market.
