The Sovereign Gold Bond (SGB) scheme, which was introduced in November 2015 to encourage retail investors to switch from physical gold to paper gold, is expected to be discontinued in the 2025-26 financial year.
A senior government official has indicated that the scheme has fulfilled its purpose and is now causing fiscal burdens due to the need to repay investors the gold-equivalent value at maturity and ongoing interest payments.
In order to achieve sustainable reduction in the debt-to-GDP ratio, Finance Minister Nirmala Sitharaman is expected to outline the debt reduction strategy in the upcoming FY26 Budget.
The debt-to-GDP ratio is projected to decrease from 58.2 percent in FY24 to 56.8 percent in FY25.
It is worth noting that no new SGBs have been issued in FY25, despite a budget allocation of Rs 18,500 crore, which is lower than the Rs 26,852 crore allocated in the interim Budget.
The Reserve Bank of India last issued SGBs in February 2023, with a total value of Rs 8,008 crore.