In charts: Behind the glitter of gold bonds scheme
₹3,173 per gram to ₹5,291 per gram—an increase of 66% in 16 months. This was also the time that SGB scheme subscriptions began picking up. August 2020 saw the highest volume of 6,350 kg (each bond is equivalent to one gram of gold) till then.
The SGB issue this June topped it with 7,769 kg. That is the tailwind behind the latest SGB issue. The first SGB was announced in November 2015.
In all, there have been 64 SGB issues, raising a total of about ₹50,000 crore. As of March 2023, the total amount outstanding under the SGB and another on-tap scheme—the gold monetisation scheme—was around ₹58,000 crore. This is yet only a fraction of the government’s immense funding needs.
For 2023-24, the projected fiscal deficit is ₹17.9 trillion. Under the SGB scheme, each bond is equivalent to one gram of gold. It is issued at a price linked to the average daily closing price of gold announced by the India Bullion and Jewellers Association (IBJA) in the days leading up to the issue.
The tenure is eight years, though redemption is allowed after year five. Bonds are redeemed at the average prevailing gold price on the redemption date. Further, the government pays 2.5% interest a year.
While interest receipts are taxed, capital gains are not. Given the five-year period, redemption under the SGB scheme began in 2021. Redemptions occur at a price announced by the government, which is linked to the average daily price announced by the IBJA in the days leading up to the redemption date.
Since 2021, of the 64 tranches of bonds issued so far, 22 have been offered for redemption. The premium for these issues—or the capital gain over a 5-year period—is between 47% and 94% over the respective issue price. In spite of this return, the bulk of bonds
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