Sovereign Gold Bonds Discontinued In FY25 On Price Volatility, Global Economic Headwinds: Finance Minister

Finance Minister Nirmala Sitharaman on Tuesday clarified in a written answer that the government's decision to discontinue Sovereign Gold Bonds in fiscal 2025 was due to rising borrowing costs, citing gold price volatility and global economic challenges.

The maturing Indian government securities market provided a more cost-effective way to raise resources, reducing the need for SGB issuances, she further added in the Rajya Sabha session.

Her statement came in response to questions from Rajya Sabha MP Narain Dass Gupta, who sought clarity on the rationale behind the move, the cost-benefit analysis, and whether an independent review was conducted before discontinuation. He also questioned the government's plans for a revised SGB scheme or alternatives to curb gold imports and the measures in place to hedge against rising gold prices.

Since their inception, the Indian government has issued 67 tranches of SGBs, amounting to 146.96 tonnes of gold. As of March 20, the outstanding value stood at Rs 67,322 crore for 130 tonnes of gold. The government has maintained a gold reserve fund in the public account, ensuring that price and interest differentials are managed over time, as per the statement.

Beyond being a tool for financing the fiscal deficit, SGBs have also played a crucial role in offering a financial alternative to physical gold, added the statement.

The last time a gold bond was issued was in February 2024. The scheme was introduced in 2015 in an effort by the government to reduce the 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.

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.