Over ₹12 trillion and interest! What government owes to Sovereign Gold Bond holders

The Indian government will have to pay the Sovereign Gold Bond investors a whooping ₹12,06,92,00,00,000 ( ₹12 trillion) if it were to redeem all outstanding gold bonds, given the gold rate of ₹9,284 per gram as of April 1. And this amount does not include the interest payout on the gold bonds.

The government, in a written reply to the Parliament, has said that “the outstanding value as on March 20, 2025 on issue price is ₹67,322 crore for 130 tonnes of gold.” Redemption of SGBs is based on the prevailing market price.

So far, the government has already fully redeemed 7 tranches of Sovereign Gold Bonds. It recently offered to prematurely pay out the money to SGB subscribers of the 8th tranche.

It may be recalled, earlier this year, the government had discontinued the Sovereign Gold Bond scheme due to high borrowing cost. 

Full redemption amount to be paid at once?

The government will not have to shell out the money for all the SGBs at one go , because each tranche will have its own maturity date. The final tranche of the SGB will be up for redemption in 2032. 

Sovereign Gold Bonds were sold in different tranches and came with a tenure of 8 years. On maturity investors would get the prevailing market price of the gold they had bought along with a periodic interest. SGBs offered an interest rate of 2.50 percent per annum on the amount of initial investment which is credited semi-annually to the bank account of the investor.

Tax Benefits

While the interest earned on SGB is taxable, if an individual investor holds SGBs until maturity (8 years), the capital gains on redemption are tax-free.

That being said, gold prices have been skyrocketing for months now. If they continue to rally like present, and if SGB investors plan to hold their investments till maturity, the government will have to shell out a much higher amount.

Since the issuance of the first tranche of SGB in 2015, gold prices have rallied 252 per cent. The government had to pay out a 128 per cent premium to SGB investors of the first tranche without interest. With interest, the premium surged to 148 per cent.

What did the govt tell Parliament on SGBs?

The government has issued a total of 67 tranches of Sovereign Gold Bonds (SGBs) amounting to 146.96 tonnes of gold till 2024-25, Parliament was informed on Tuesday.

The outstanding value as on March 20, 2025, on issue price is ₹67,322 crore for 130 tonnes of gold, Minister of State for Finance Pankaj Chaudhary said in a written reply.

The government has maintained a Gold Reserve Fund (GRF) in the Public Account where the price and interest differential amount is credited in time, he said.

The SGBs, in addition to other borrowing instruments, have been an instrument for raising resources for financing fiscal deficit, he said. However, in addition to these, SGBs also served the purpose of savings/financial instruments as an alternative to physical gold, he said.

Due to the recent gold price volatility and global economic headwinds, this form of borrowing has become relatively expensive.

“Therefore, based on maturing and deepening of Indian G-Sec market, which helped in mobilising relatively low-cost borrowing, resources were not raised through SGBs in FY 2024-25,” he said.