The Indian government has actively utilised Sovereign Gold Bonds (SGBs) as a strategic financial tool. By the financial year 2024-25, a total of 67 tranches had been issued, amounting to a significant volume of gold. This blog explores various aspects of the SGB programme, including its issuance, valuation, redemption policy, and recent changes.
Minister of State for Finance, Pankaj Chaudhary, informed Parliament that as of the financial year 2024-25, the government issued 67 tranches of Sovereign Gold Bonds, equivalent to approximately 146.96 tonnes of gold. The outstanding valuation of these bonds, based on the issue price, was ₹67,322 crore for 130 tonnes of gold, as of March 20, 2025.
The redemption process for Sovereign Gold Bonds is tied directly to the prevailing market price of gold at the time of maturity. Investors receive returns based on this price, providing them with potential appreciation aligned with market fluctuations.
To manage the risks and maintain financial stability associated with Sovereign Gold Bonds, the government established the Gold Reserve Fund (GRF). This fund is maintained within the Public Account and regularly credits the price and interest differential amounts. The GRF helps manage discrepancies arising from fluctuations in gold prices, thereby stabilising the scheme.
Sovereign Gold Bonds were primarily introduced as a tool to finance India’s fiscal deficit, alongside other borrowing instruments. However, they have also gained popularity among investors as an alternative savings instrument to physical gold. The bonds provide investors with a secure, digital mode of holding gold, eliminating concerns related to storage, theft, and purity.
In recent times, global economic headwinds and significant volatility in gold prices have increased the cost associated with issuing SGBs. Highlighting this issue, Pankaj Chaudhary noted, “Therefore, based on maturing and deepening of Indian G-Sec market, which helped in mobilising relatively low-cost borrowing, resources were not raised through SGBs in FY 2024-25.” This indicates a strategic shift by the government towards more cost-effective borrowing alternatives like Government Securities (G-Secs).
In a separate disclosure, Chaudhary informed that as of February 28, 2025, over 52.07 crore loans have been sanctioned under the Pradhan Mantri Mudra Yojana (PMMY) since its inception. Additionally, the average non-performing assets (NPAs) for the scheme stood at a manageable 2.21% of the amount disbursed, according to data provided by Member Lending Institutions (MLIs) on the Mudra portal.
The Sovereign Gold Bond scheme continues to play an integral role in India’s economic strategy, adapting to market conditions and fiscal priorities. Although issuance paused in FY25 due to economic factors and more favourable borrowing options, SGBs remain a relevant and attractive savings alternative for many Indian investors, reflecting their dual role as a financing and investment instrument.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Apr 2, 2025, 3:58 PM IST
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