New Sovereign Gold Bonds Unlikely, Says Economic Affairs Secretary Ajay Seth

Discontinuation of sovereign gold bonds are in the talks, said Ajay Seth at the post-budget press briefing on Saturday. The Economic Affairs Secretary said that the issue of gold bonds will be unlikely.

The last time gold bond was issued was in February last year. The scheme was introduced in 2015 in an effort by the government to reduce gold import burden on the country by giving Indians a proxy and tax-efficient way to invest in gold. These bonds had great traction among investors as the advantage of a safe-haven investment came with government backed stability.

Of late, gold prices have risen to record levels, on the back of global uncertainty and other factors, making redemption of these instruments costlier for the central bank.

Previously, Reserve Bank of India had announced the premature redemption dates for Sovereign Gold Bonds issued between May 2017 and May 2020. To provide early liquidity options, the RBI plans to redeem 30 SGBs between Oct. 11, 2024, and March 1, 2025.

The redemption price will be based on the average gold prices from the three business days preceding the maturity date. Investors can submit redemption requests during a 20-day window before each bond's maturity, with the redemption amount and accrued interest credited to their accounts within 10 days of submission.

As per RBI guidelines, investors could request premature redemption after holding the bonds for five years from the issue date. Redemption requests should be submitted within the designated windows through Receiving Offices, National Securities Depository Ltd., Central Depository Services Ltd., or RBI Retail Direct.

The first redemption period began on Oct. 11, 2024, for SGBs issued on May 12, 2017. This had closed on Nov. 2, 2024, with payments scheduled till Nov. 12, 2024 as well.

SGBs are government-backed securities priced in grams of gold, providing a cash alternative to physical gold ownership. Investors purchase these bonds at an issue price and receive cash upon maturity. Issued by the RBI on behalf of the Government of India, these bonds offer a hassle-free investment in gold.