Govt targets to sell 40-45 tonnes of SGBs in FY25

financialexpress.com:

By Rajesh Bhayani,

The Centre has estimated 40-45 tonne (at current prices) of subscription for Sovereign Gold Bonds (SGBs) in the interim Budget. According to the document of Statement of Liabilities of the central government, the current financial year’s provision under the liabilities of SGB, as per revised estimates was Rs 69,998 crore. This has been revised upwards to in FY25 to Rs 96,136 crore — an increase of Rs 26,138 crore.

Since the SGBs are part of the government borrowings, its liabilities are provided at the market price of gold when estimates were prepared. This means that the total value of the currently 131 tonne of outstanding gold bonds held with the government when estimates were prepared stood at Rs 69,998 crore.

For FY25, the higher amount of Rs 26,000 crore is 37.34% higher. The higher amount, experts say, is accounting for bonds worth 40-45 tonne of gold. Shekhar Bhandari, president, Kotak Mahindra Bank, said, “SGB has proved to be best asset class over last couple of years. It is better than physical gold since it provides a 2.5% guaranteed return. So, the government has continued to provide for it in FY 25.”

It may be noted that money raised through gold bond replaces the demand for physical gold, thereby saving foreign exchange. In the first three quarters of FY24, 31 tonne physical demand has been replaced by bonds. SGBs have proved to be the best instrument for gold investment because of 2.5% annual interest and exemption in capital gain tax on maturity.

For interest payment, according to the expenditure budget, government has provided Rs 2,000 crore for FY25 against Rs 1,227 crore of FY24. After holding bonds for five year from the issue date, the Reserve Bank of India has allowed premature