Are you eagerly waiting for the next Sovereign Gold Bond (SGB) installment? Unfortunately, you may have to wait longer, as reports suggest that the government is hesitant to issue a new tranche. While there has been no official confirmation, sources say that the likelihood of a new SGB release is low. The reasons behind this reluctance are largely financial, as issuing SGBs has become costlier for the government.
Why is the Government Not Keen on Issuing More SGBs?
One of the primary reasons for this hesitation is the cost involved. The money raised through Sovereign Gold Bonds is more expensive for the government compared to other loans. Another reason is that SGBs do not fall under any social security scheme, reducing their significance in the eyes of policymakers.
Additionally, the rising gold prices over the years have also added to the government’s concerns. With the price of gold on a steady rise over the last decade, repaying investors at maturity has become increasingly expensive.
How to Invest in SGBs Now?
If you’re looking to invest in Sovereign Gold Bonds and don’t want to wait for a new installment, there’s another option. Experts suggest purchasing SGBs from the secondary market, where they are traded on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Investors can buy these bonds from existing tranches, giving them access to SGBs without waiting for a new release.
A Look at Past Sovereign Gold Bond Tranches
To date, the Reserve Bank of India (RBI) has released 67 tranches of Sovereign Gold Bonds, raising a total of ₹72,274 crore from investors. Out of these, four installments have already matured, meaning the government has repaid these investors based on the current gold prices.
In FY23, the government transferred ₹2,424 crore to the Gold Reserve Fund to cover SGB redemptions. By FY25, this amount is expected to soar to ₹8,551 crore, marking a 250% increase. The rising costs are another factor behind the government’s reluctance to issue more SGBs.
Why Was the Sovereign Gold Bond Scheme Launched?
The Sovereign Gold Bond scheme was introduced in 2015 as an alternative to physical gold investments. The goal was to reduce the country’s reliance on gold imports, which put pressure on India’s foreign exchange reserves. By offering SGBs, the government aimed to encourage people to invest in gold in a way that wouldn’t affect the nation’s foreign currency reserves.
Key Features of SGBs
Sovereign Gold Bonds are issued by the RBI on behalf of the government and come with an 8-year maturity period. Investors earn 2.5% interest annually on their investment, and when the bond matures, they receive the equivalent value of gold based on the market price at the time. This makes SGBs an attractive option for investors looking for a safe and profitable alternative to physical gold.
