SGB Scheme: The Government of India introduced the Sovereign Gold Bond (SGB) scheme in 2015 to regulate the import of physical gold. As per media reports, this program might be halted starting the next financial year 2025-26, since the government is currently concentrating on lowering its loan-to-GDP ratio.
Sovereign Gold Bond Scheme has fulfilled its role and adds to the government’s financial strain
A report from media cites a senior government official stating that the Sovereign Gold Bond Scheme has fulfilled its role and adds to the government’s financial strain. The official stated, “At maturity, the government must compensate SGB investors with the equivalent value of gold, thus raising the government’s liabilities.” Moreover, consistent interest payments strain the government’s financial resources. The government intends to gradually decrease the loan-to-GDP ratio starting from FY27. Finance Minister Nirmala Sitharaman might reveal a proposal related to this in the forthcoming FY26 budget.
In the budget address given in July, the Finance Minister reaffirmed the government’s dedication to fiscal consolidation and established a goal of maintaining the fiscal deficit under 4.5 percent in FY26. Furthermore, the loan-to-GDP ratio is projected to decrease from 58.2 percent to 56.8 percent in FY25. The FY25 budget designated Rs 18,500 crore for sovereign gold bonds, reduced from the FY24 interim budget of Rs 26,852 crore. As of now, no new SGB has been released in FY25. The Reserve Bank of India (RBI) most recently launched SGB in February 2023, totaling Rs 8,008 crore.
The Sovereign Gold Bond Scheme, introduced in 2015, sought to draw retail investors from investing in physical gold to paper gold. These bonds had an eight-year maturity period, with partial redemption occurring after five years. At first, the interest rate stood at 2.75 percent, later decreased to 2.5 percent. In the FY25 budget, it has been determined to lower the gold import duty from 15 percent to 6 percent.