Sovereign Gold Bond, abbreviated as SGB, is a government security issued by the Reserve Bank of India (RBI) on behalf of the Government of India. It is denominated in grams of gold and is linked to the price of gold in India. It is also an interest-bearing bonds, carrying an interest of 2.5% p.a. paid in two installments in a year.^[1][2]

The bond has an 8-year term with an option for early withdrawal through the RBI after 5 years. It is listed and traded on Indian stock exchanges, allowing eligible investors to buy or sell anytime through their dematerialization accounts. It can also be transferred to another eligible investor without redemption through the RBI.^[3]

The scheme was introduced due to a forex crisis caused by high gold imports.^[4] It was first notified by the Department of Economic Affairs on 14 January 2016 under the Government Securities Act, 2006. The initial subscription required a minimum of 2 grams and a maximum of 500 grams. It was open from January 18 to January 22, 2016. The bonds initially paid 2.75% interest per year, later reduced to 2.5% per year.^[5][2] The bonds were sold through banks, post offices and through online securities brokers which would allow investors to hold the bonds in demat form.^[6][7]

In August 2024, the investors who would have redeemed the bonds issued in August 2016 lost suffered a loss due a fall in the price of gold. This fall was linked to the slash in import duty on gold from 15% to 6% during the 2024 Union budget of India.^[8]

After the final redemption of the 2016-I series, it was rumoured that the scheme was turning out to be very expensive for the Indian government, due to an unexpected rise in the prices of gold. The government also felt SGBs have also not served the purpose for which it was launched, which was to bring down gold imports by trying to move demand from physical gold to an electronic form. In addition, the RBI has not issued any new series after February 2024.^[9][10] The government also made physical gold purchases more attractive, by lowering the import duty from 15% to 6%.^[11]

People residing in India, as defined in he Foreign Exchange Management Act, 1999 are eligible to invest in SGBs. These include individuals, Hindu Undivided Families (HUFs), universities, trusts, and charitable institutions. People who become non-residents after buying an SGB can still hold it until maturity or premature redemption.^[3]

The bonds are issued in 1-gram denominations and multiples thereof. Each eligible investor can purchase up to 4 kg per financial year. A demat account is optional; bonds can be held in dematerialized form with a securities depository or tracked by the RBI.^[3]

The issue price is the average closing price of 999 purity gold from the last 3 business days before the subscription period, as published by the India Bullion and Jewelers Association Limited (IBJA). The redemption price, for both early and maturity redemptions, is the average closing price from the 3 business days before repayment.^[12]

SGBs, purely as an investment format, can be compared to other forms of investing in Gold.^[13]

Note: CAGR calculations do not include interest payments and are post-tax, since capital gains tax arising on redemption of SGB to an individual has been exempted.^[16]

• Sovereign Gold Bond Scheme FAQs - Reserve Bank of India
• Sovereign Gold Bonds Notifications - Reserve Bank of India

• Saranya, S; Antony, Nittymol (16 July 2024). "Influence of Social Media on Investment Decisions of Women with Special Focus on Sovereign Gold Bonds". Artificial Intelligence (AI) and Customer Social Responsibility (CSR). Springer. pp. 603–612. doi:10.1007/978-3-031-50939-1_46. ISBN 978-3-031-50939-1.
• S. Yadav, Anitha; Shetty, Chetan (16 April 2018). "Gold Monetization Scheme: Issues and Challenges". FIIB Business Review. 5 (4): 8–15. doi:10.1177/2455265820160402.