Why no new Sovereign Gold Bonds? Govt breaks silence on pause amid soaring gold prices

The Centre is currently holding back on issuing fresh Sovereign Gold Bonds (SGBs), citing the need to adopt a “prudent debt management” strategy amid skyrocketing gold prices that have significantly raised the cost of borrowings.

In a written reply in the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary said the government assesses various financial instruments, such as Government Securities, Treasury Bills, and SGBs—based on relative costs. With gold prices up more than 70% since the last tranche in February 2024 (Series IV, 2023–24), SGBs have become a less attractive option for fundraising.

“It is imperative for a prudent debt management strategy to carefully consider the above factor (lowering the cost of borrowings),” the minister said, adding that the decision to issue new tranches will depend on ongoing evaluations of borrowing costs.

The government said recent global geopolitical unrest has been a major driver of gold price inflation, which in turn has pushed up the cost of mobilising funds through SGBs. The current pause, officials said, is a calibrated move to reduce financial strain.

Since its launch in 2015, the SGB scheme has collected subscriptions worth ₹72,275 crore, representing around 146.96 tonnes of gold across 67 tranches. Of this, 18.81 tonnes have been redeemed as of June 15, 2025.

On the Gold Monetization Scheme (GMS), Chaudhary said the government has discontinued the medium- and long-term deposit components from March 26, 2025, owing to changing market dynamics. Only the short-term deposits (STGD) remain operational under GMS, which has mobilised a total of 37.81 tonnes of gold so far.

GMS was launched in 2015 to channel idle household and institutional gold into the financial system. However, rising gold prices made the scheme more costly for the government to sustain.

Responding to questions on whether GMS and SGBs were failing to meet their objectives—despite the massive stock of gold held by Indians—Chaudhary quoted the World Gold Council’s July 2023 report. It is estimated that households and religious institutions in India hold 23,000–25,000 tonnes of gold worth nearly $1.4 trillion.

He stressed that both schemes were aimed at reducing reliance on physical gold and mobilising resources efficiently. “A decision on the mode of mobilising resources is taken after due consideration of the relative costs to the government,” he said.

The ministry confirmed that further SGB issuances would be evaluated carefully, balancing investor interest with the broader goal of cost-effective debt management.

The SGB scheme, launched in 2015 to curb the demand for physical gold, has attracted significant investor interest over the years. According to the finance ministry, the scheme has amassed subscriptions totaling approximately 146.96 tonnes of gold—valued at around ₹72,275 crore—across 67 tranches as of March 31, 2025. Of this, 18.81 tonnes have already been redeemed as of June 15, 2025.

The Reserve Bank of India (RBI) recently announced that the premature redemption price for the Sovereign Gold Bonds (SGB) 2018-19 Series-V will be Rs 9,820 per unit. These bonds are scheduled to be redeemed on July 22, 2025.