Union Budget 2025 | Sovereign gold bond scheme likely to go

New Delhi: The sovereign gold bonds scheme, introduced in 2015 to keep the current account deficit (CAD) under control by reducing the demands for physical gold, is likely to be discontinued, said Finance Minister Nirmala Sitharaman on Saturday.

It finds no mention in the Union Budget 2025-26. The last sovereign gold bond (SGB) issue was in February 2024.

Asked during a post-Budget interaction whether the Central government had decided to discontinue the scheme as no announcement had been made on it in consecutive budgets, Sitharaman replied tersely, “Yes, in a way.”

Economic Affairs Secretary Ajay Seth said the Centre’s decision to discontinue the scheme was mainly due to the high cost of borrowings.

“These decisions are taken to raise borrowings from the market to finance the Budget, and at some point, whether this asset class is to be supported or not (has to be considered),” he said.

“Recent experiences have been that this has been a rather fairly high-cost borrowing for the government. As a result, the government has chosen not to follow that path,” he added.

SGBs are government securities and are considered safe. Their value is denominated in multiples of grams of gold. The scheme was announced in the Union Budget 2015-16 by then-finance minister Arun Jaitley.

“India is one of the largest consumers of gold in the world and imports as much as 800-1000 tonnes of gold each year. Though stocks of gold in India are estimated to be over 20,000 tonnes, this gold is mostly neither traded nor monetised,” Jaitley had said in the 2015 budget speech when announcing the scheme.

As per an official statement after the approval of the scheme by the Union Cabinet in September 2015, the scheme was expected to help reduce "the demand for physical gold by shifting a part of the estimated 300 tons of physical bars and coins purchased every year for investment into gold bonds".

It added: "Since most of the demand for gold in India is met through imports, this scheme will ultimately help in maintaining the country's CAD within sustainable limits.”

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