Key Terms & Concepts — UPSC Mains
Sovereign Gold Bond (SGB)
"Government securities denominated in grams of gold, issued by the RBI as a paper alternative to holding physical gold."
Sovereign Gold Bonds are debt securities issued by the Reserve Bank of India on behalf of the Government of India, denominated in grams of gold. Launched in November 2015 under the Gold Monetisation scheme umbrella, they pay a fixed annual interest (2.5 percent) on the issue value and track the market price of gold at redemption, with an eight-year tenure and exit allowed after five years. They were designed to reduce physical gold imports and channel household savings into financial assets.
GS3 (mobilisation of resources, government securities, current account). Prelims tests the issuer (RBI), the interest rate and the tenure. Mains links SGBs to gold imports and the current account deficit. Anchor: no new SGB tranche has been issued since 2023-24 Series IV in February 2024, and the government confirmed the scheme's discontinuation for fresh issues, as the sharp rise in gold prices made SGBs an expensive form of borrowing.
- 1 Issued by the RBI on behalf of the Government of India
- 2 Denominated in grams of gold; launched in November 2015
- 3 Pay 2.5 percent fixed annual interest on the issue value
- 4 Eight-year tenure with exit allowed after the fifth year
- 5 Aimed to cut physical gold demand and imports
- 6 Discontinued for new issues; last tranche was 2023-24 Series IV
By 2026 the government had stopped floating fresh Sovereign Gold Bonds, with premature redemption windows opening for older tranches as gold's rally made the scheme costly to sustain.
