Sovereign Gold Bonds (SGB): notes for bank exams

At a glance

Sovereign Gold Bonds are government securities denominated in grams of gold. The investor pays the rupee value of the gold at issue, earns a fixed 2.5% a year on that amount, and at exit receives the rupee value of the same grams of gold at the then market price. The RBI issues them on behalf of the Government of India. The scheme was launched to cut demand for physical gold imports; no fresh tranche has been issued since February 2024.

Key facts

Launched: November 2015 (with the Gold Monetisation Scheme)
Issuer: RBI, on behalf of the Government of India
Legal basis: Government Securities Act, 2006
Tenure: 8 years
Early exit: allowed from the 5th year, on interest payment dates
Interest: 2.5% a year on the issue price, paid half-yearly, taxable
Minimum investment: 1 gram
Maximum per financial year: 4 kg (individuals, HUFs); 20 kg (trusts and similar bodies)
Price basis: simple average of IBJA closing price of 999-purity gold for the last 3 business days
Last tranche: 2023-24 Series IV, February 2024
Tradable: on stock exchanges; can be pledged as loan collateral

How it works

Buying (when open): through banks (not small finance or payments banks), Stock Holding Corporation, designated post offices and NSE/BSE. Online applicants got ₹50 per gram off.
Pricing: issue and redemption prices use the IBJA 999 gold price averaged over the three business days before the relevant date.
Returns: gold price change plus 2.5% interest. The interest is on the original investment, not on the current value.
Exit routes: maturity after 8 years, premature redemption with the RBI from year 5, or sale on the exchange any time.

Tax:

Event	Treatment
Interest	Taxable as income; no TDS
Redemption at maturity	Capital gains exempt; from 1 April 2026 only for the original subscriber who held till maturity (Budget 2026)
Sale on exchange	Capital gains tax applies

Status: after Budget 2025-26, the Finance Ministry indicated that SGBs had become costly borrowing for the government and that new issues would not continue. Existing bonds run to maturity as promised.

Recent developments

16 Oct 2026: The RBI set the premature redemption price of SGB 2020-21 Series VII at ₹14,614 per unit, for redemption due on 19 October 2026, based on the IBJA 999 average for 14–16 October.
01 Apr 2026: Capital gains exemption on redemption limited to bonds bought at original issue and held till maturity (Budget 2026).

Exam traps

Tenure is 8 years, with exit from the 5th year, not the 3rd.
Interest is 2.5%, fixed, and taxable; it is calculated on the issue price.
One unit = one gram of gold.
SGBs are issued by the RBI but are Government of India debt.
Do not confuse SGBs with Gold ETFs (SEBI-regulated mutual fund units) or the Gold Monetisation Scheme (deposit of physical gold with banks).

Quick check

Q: What is the interest rate on SGBs? A: 2.5% a year.
Q: After how many years is premature redemption allowed? A: From the fifth year.
Q: What was the 19 October 2026 redemption price for SGB 2020-21 Series VII? A: ₹14,614 per unit.

Sovereign Gold Bonds (SGB)