In the Union Budget 2025, Finance Minister Nirmala Sitharaman announced the discontinuation of the Sovereign Gold Bond (SGB) scheme, which was introduced in 2015 to reduce India’s dependency on physical gold imports. The Budget 2025 date and time was set for February 1, 2025, and during the budget speech time, this decision was officially confirmed.
Why Did the Government Stop SGBs?
The primary reason for discontinuing the SGB scheme was the high cost of borrowing associated with it. Economic Affairs Secretary Ajay Seth stated that:
- The interest rate of 2.5-2.75% per annum on SGBs made them a costly financial tool for the government.
- The RBI issued the last batch of SGBs in February 2023, amounting to ₹8,008 crore.
- Since its launch, the total SGB issuance had reached ₹45,243 crore as of FY23.
Seth further added that the SGB scheme did not significantly impact India’s gold import reduction, making it an unsustainable policy.
Gold Investment Alternatives After SGB Discontinuation
With no new SGB issuances, investors now have alternative options such as:
- Gold Exchange-Traded Funds (Gold ETFs) – Track domestic gold prices and provide a liquid investment option.
- Gold Mutual Funds (Gold MFs) – Open-ended funds that invest in Gold ETFs with professional fund management.
- Listed SGBs – Investors can still buy previously issued SGBs in the secondary market via NSE and BSE.
Experts predict that after the budget announcement time, there will be increased demand for digital gold investments, impacting gold price trends in India.
What’s Next for Gold Investments in India?
- With SGBs discontinued, new investment demand will likely shift to Gold ETFs and Gold MFs.
- Analysts suggest that gold price volatility will increase in the coming months.
- The government is expected to explore other financial instruments to manage gold-related borrowing costs.