Much hyped Sovereign Gold Bond scheme ( SGB) which was introduced in 2015 and much popular in middle and lower middle class due to its yearly payment schedule along with regular price appreciation is all set to be rule out from 2025. Reason stated by central government to reduce its interest liability. As per government official communiqué, SGB is continuously creating fiscal pressures as its maturity time is near the corner and govt has to pay its equivalent value along with interest payments. On the other hand government also changes its vision and policy towards lowering the debt to GDP ratio as finance minister Nirmala Sitaraman also announced to downsize debt and increases fiscal consolidation targeting a fiscal deficit to be less than 4.5 % from next financial year.

As per the budget announcement in 2024, the debt-to-GDP ratio is targeted to be lower down from 58.2 percent in FY24 to 56.8 percent in FY25. In addition to this, despite an allocation of more than Rs 18500 crore for SGB in last budget, RBI have decided to stop issuing SGB in 2025. Last SGB was introduced way back in 2023 amounting to Rs 8000 cr and till now there is no update of further issuing for current year.

So the bigger question is why issuers change their instance? When SGB launched in 2015 it has one major objective and that is to change people buying tendency in physical gold to paper gold. SGB launched with 8 years maturity with 2.75 % annual interest which makes it more attractive and popular among all classes. Later on interest was reduced to 2.50%.  As a result people heavily invested around Rs 45000 cr and now by March 2023 outstanding amount raised to more than 4 trillion.

In the last budget for FY2025, FM  Nirmala Sitaraman also reduced gold import duty to 6% from 15% . This move clearly indicates that Govt is not further interested to launch any SGB in near future. Moreover RBI also introduced early redemption of SGB in 2017 and 2020.

Sovereign Gold Bond Redemption Price

For redemption there is a very simple calculation. Redemption price is calculated on the basis of last three working days average closing price with 99.9 purity of Indian Bullion and Jewelers association. Thus, the final redemption price for the SGB 2016 Series I redemption due on 8 February 2024 is Rs. 6,271 per unit of SGB based on the simple average of closing price of gold for the week of 29 January -02 February 2024.

Similarly, the final redemption price for the SGB 2016 Series II redemption due on 28 March 2024 is Rs. 6,601 per unit of SGB based on the simple average of closing price of gold for the week of 18 March -22 March 2024.

Investors can initiate early redemption of their SGBs after the fifth year from the date of SGB issuance, coinciding with the interest payment date. On 15 July 2024 and 19 July 2024, the RBI announced the premature redemption price of three SGBs issued in 2019-20 (Series II), 2018-19 (Series V) and 2017-18 (Series II).