The centre will be discontinuing the Sovereign Gold Bond scheme due to the high cost of borrowing for the government. (Image Source: Pixabay)
New Delhi: The centre will be discontinuing the Sovereign Gold Bond scheme due to the high cost of borrowing for the government. This decision was confirmed by Finance Minister Nirmala Sitharaman during the media briefing after the Budget on February 1 when she replied “Yes, in a way”. The SGB scheme was initiated in 2015 to reduce physical gold imports. Although the FY25 Budget has reduced the amount and allocated Rs 18,500 crore for SGBs, no new tranches of SGBs have been released in the ongoing fiscal year.
Explaining the decision in the briefing, Economic Affairs Secretary Ajay Seth said, “These are the decisions which are taken with the purpose of raising borrowings from the market, for the purpose of financing the Budget, and at some point of time, whether this asset class is to be supported or not.”
Seth further reasoned, “The recent past experiences have been that this has been a rather fairly high-cost borrowing for the government. As a result, the government has chosen not to follow that path.”
The Reserve Bank of India (RBI) released SGBs for the last time in February 2023, totalling Rs 8,008 crore. Since its launch, the overall issuance under the SGB scheme has reached Rs 45,243 crore as of FY23, with a remaining amount of Rs 4.5 lakh crore by March 2023.
What Is The SGB Scheme?
Introduced in 2015, the SGB scheme was launched as an alternative to physical gold. They give investors the option to own gold in paper or digital form as an alternative to investing in physical gold and is one of the most reliable options available for an investor. The Reserve Bank of India (RBI) issues these government-backed securities on behalf of the Indian government. There are two ways for investors to purchase Sovereign Gold Bonds (SGBs): the primary market and the secondary market. The SGBs have a maturity period of 8 years. Investors are permitted early redemption only after the fifth year on coupon payment dates. Investors receive a reminder one month before the maturity of the bonds.
