Indians love gold, but buying physical gold means worrying about purity, storage and theft. To give people a safer way to invest in gold, and to cut gold imports, the government launched Sovereign Gold Bonds (SGBs) and the Gold Monetisation Scheme (GMS) in 2015. Both have changed a lot since then. Exams ask about their features, the interest rate, the tenure and their current status. This post explains them in simple words. It ends with 15 previous year questions.
Key Points (Quick Revision)
- Sovereign Gold Bonds were launched in November 2015 and issued by the RBI on behalf of the Government of India.
- SGBs paid 2.5% interest a year and had a tenure of 8 years.
- No new SGB tranche has been issued since February 2024, and the government said in 2025 that the scheme would be discontinued.
- The Gold Monetisation Scheme let people deposit idle gold and earn interest.
- Its medium- and long-term deposits were stopped from 26 March 2025; short-term bank deposits continue.
1. Why gold schemes were needed
India is one of the world's largest importers of gold. Heavy gold imports increase the current account deficit, because India pays foreign currency for it. Most of this gold then lies idle in homes and lockers.
In the Budget 2015-16, the government announced three steps:
- Sovereign Gold Bonds - invest in gold without buying physical gold.
- Gold Monetisation Scheme - put idle household gold to productive use.
- Indian Gold Coin - a national gold coin with the Ashoka Chakra.
2. Features of Sovereign Gold Bonds
| Feature | Detail |
|---|---|
| Issued by | RBI, on behalf of the Government of India |
| Unit | Grams of gold; minimum 1 gram |
| Maximum limit | 4 kg per year for individuals and HUFs; 20 kg for trusts |
| Interest | 2.5% a year on the issue price, paid every six months |
| Tenure | 8 years, with exit allowed after the 5th year on interest dates |
| Price | Based on the average price of 999-purity gold; a ₹50 per gram discount for online buyers |
| Trading | Can be traded on stock exchanges and used as collateral for loans |
3. Benefits and tax rules
- No worry about purity, storage or theft.
- Investors gain from the rise in gold price plus 2.5% interest.
- Capital gains on redemption at maturity are tax-free for individuals.
- The interest is taxable as income.
- Banks can count SGBs towards their Statutory Liquidity Ratio (SLR).
4. Why the SGB scheme was stopped
SGBs became very popular as gold prices rose. But for the government, every SGB is a borrowing whose repayment is linked to the gold price. When gold prices rose sharply, the cost of repaying these bonds went up a lot.
- The last tranche, 2023-24 Series IV, was issued in February 2024.
- At the Budget 2025-26 briefing, the Finance Minister indicated that the scheme would be discontinued because of its high cost.
- Existing bonds continue till maturity or early redemption, with interest paid as promised.
5. The Gold Monetisation Scheme
The Gold Monetisation Scheme (GMS), 2015 allowed people and institutions to deposit idle gold - jewellery, coins or bars - with banks and earn interest. The gold was melted and used by the government or lent to jewellers.
| Component | Tenure | Run by |
|---|---|---|
| Short-term bank deposit | 1-3 years | Banks |
| Medium-term government deposit | 5-7 years | Government, through banks |
| Long-term government deposit | 12-15 years | Government, through banks |
From 26 March 2025, the government discontinued new medium- and long-term deposits, citing the scheme's performance and market conditions. Existing deposits run till maturity, and banks can continue short-term deposits.
6. SGB vs physical gold vs gold ETF
| Point | SGB | Physical gold | Gold ETF |
|---|---|---|---|
| Extra income | 2.5% interest | None | None |
| Storage worry | No | Yes | No |
| Making charges | No | Yes, on jewellery | No, small expense ratio |
| New issues now | Stopped | Available | Available |
7. Indian Gold Coin and hallmarking
- The Indian Gold Coin, launched in 2015, was India's first national gold coin, with the Ashoka Chakra on one side.
- Hallmarking of gold jewellery by the Bureau of Indian Standards (BIS) became mandatory in phases from 2021, with a HUID (unique ID) on each piece.
8. Previous year questions
- When were Sovereign Gold Bonds launched? – November 2015
- Who issues Sovereign Gold Bonds? – RBI, on behalf of the Government of India
- What was the interest rate on SGBs? – 2.5% a year
- What was the tenure of SGBs? – 8 years
- After which year could SGBs be redeemed early? – After the 5th year
- What was the minimum investment in an SGB? – 1 gram
- What was the maximum SGB investment for an individual in a year? – 4 kg
- Are capital gains on SGB redemption at maturity taxable for individuals? – No, they are tax-free
- When was the last SGB tranche issued? – February 2024 (2023-24 Series IV)
- In which Budget were SGB, GMS and the Indian Gold Coin announced? – Budget 2015-16
- What symbol is on the Indian Gold Coin? – Ashoka Chakra
- What was the tenure of the long-term deposit under GMS? – 12-15 years
- From when were medium- and long-term GMS deposits discontinued? – 26 March 2025
- Which body runs hallmarking of gold jewellery? – Bureau of Indian Standards
- What is the unique ID on hallmarked jewellery called? – HUID
9. How to revise this topic
Start with the background: high gold imports, current account deficit, Budget 2015-16 with SGB, GMS and the Indian Gold Coin.
Next, learn the SGB numbers: 1 gram minimum, 4 kg maximum, 2.5% interest, 8 years, exit after 5 years, ₹50 online discount.
Then fix the status: last tranche February 2024, discontinuation indicated in 2025, existing bonds continue.
Finally, remember GMS: short (1-3 years), medium (5-7), long (12-15); medium and long stopped from 26 March 2025.
10. Frequently Asked Questions
What are Sovereign Gold Bonds?
Sovereign Gold Bonds are government securities in grams of gold, issued by the RBI on behalf of the Government of India from 2015. They paid 2.5% interest a year and had an 8-year tenure.
Are Sovereign Gold Bonds still being issued?
No new tranche has been issued since February 2024, and in 2025 the government indicated the scheme would be discontinued. Existing bonds continue till maturity.
Is SGB income taxable?
The 2.5% interest is taxable as income, but capital gains on redemption at maturity are tax-free for individuals.
What is the Gold Monetisation Scheme?
It is a 2015 scheme that lets people deposit idle gold with banks and earn interest. Its medium- and long-term government deposits were discontinued from 26 March 2025, while short-term bank deposits can continue.
Why did the government stop SGBs?
Because repayment is linked to the gold price, the sharp rise in gold prices made SGBs a costly way for the government to borrow.
For more Economy topics in simple language, see our Balance of Payments and Foreign Trade, Public Debt and FRBM and Digital Rupee and Crypto posts, or browse the Economy section. Preparing for a bank exam? Start with the RBI Grade B guide or join the 100 Hour GS Course.