Why Government has stopped the SGB bonds ?

The Indian government has stopped the Sovereign Gold Bond (SGB) scheme due to high borrowing costs. Finance Minister Nirmala Sitharaman announced this on February 1, 2025, during the post-Budget press conference. The SGB scheme, launched in 2015, aimed to reduce physical gold demand by encouraging paper gold investments. Although Rs 18,500 crore was allocated for SGBs in the FY25 Budget, no new issuances were made this fiscal year. The last issuance, in February 2023, raised Rs 8,008 crore.

The SGB scheme had an eight-year maturity period with partial redemption available after five years. Initially, the bonds offered a 2.75% annual interest rate, later reduced to 2.5%. The high cost of borrowing led to the scheme’s discontinuation, aligning with the government’s strategy to raise funds from the market for Budget financing. This change reflects the government’s new approach to managing fiscal needs and borrowing costs.