SGB (RBI's Headache in 2027)
SGBs: A Windfall With Hidden Costs Sovereign Gold Bonds (SGBs) were launched as a clever idea. The government wanted households to shift from physical gold to a paper form, while also raising funds in the process. The product looked simple and safe. It was backed by the government, linked to gold prices, and paid a fixed 2.5% annual interest. The bonds had an 8-year maturity, with an exit option after 5 years. However, a key feature changed the story. The bonds were linked to the market price of gold at redemption. As gold prices surged, early SGB investors earned extraordinary returns. This upside for investors now creates a potential fiscal challenge for the government. How Early Investors Gained So Much Consider one example. The SGB 2018–19 Series III was issued at 3,133 rupees per gram. Its premature redemption price on 13 May 2026 was 15,102 rupees per gram. That implies a return of about 382%. Other tranches have shown absolute returns of 200% to nearly 400%. Data from recent red...
