Government’s Gold Bond Liabilities: ₹1.12 Lakh Crore at Risk as 61 Tranches Await Redemption

Budget 2025 has underscored the government’s evolving stance on Sovereign Gold Bonds (SGBs). Unlike previous years, the government has chosen not to raise any debt via SGBs, revising its earlier ₹15,000 crore borrowing estimate for FY25 to zero. Consequently, there have been no fresh issuances of SGBs in FY25, making the February 2024 tranche the most recent.

The shift in strategy signals the government’s intent to focus on redeeming existing gold bonds rather than adding new liabilities. This change is evident in the budget allocation, which projects SGB redemptions amounting to ₹8,040 crore in FY25— the highest redemption figure recorded so far. However, for FY26, the government has lowered this estimate to ₹5,510 crore.

Government’s SGB Liabilities: A Shrinking but Significant Burden

The accumulated liabilities from past SGB issuances have been a growing concern. In the July 2024 Budget, the government estimated its gold bond obligations would reach ₹85,000 crore by the end of FY25, nearly nine times the FY20 figure. However, in the revised estimates presented in February 2025, this projection was significantly reduced.

With no new issuances and a focus solely on repayments, the government now expects its SGB liabilities to drop to ₹60,565 crore by the end of FY25 and further decline to ₹55,000 crore in FY26. Despite this reduction, the burden remains substantial, as the liabilities are still over 5 times the FY20 level.

Long Road Ahead: 61 Tranches Yet to be Redeemed

Although the government has successfully redeemed six tranches of SGBs, 61 tranches remain outstanding, with the final redemption scheduled for February 2032.

The Reserve Bank of India’s (RBI) annual report for FY24 highlights that since the launch of the SGB scheme in November 2015, a total of ₹72,274 crore (146.96 tonnes of gold) has been raised through 67 tranches. As of 14 February 2025, Indian investors still hold gold bonds equivalent to 132 tonnes, estimated to be worth ₹1.12 lakh crore at current market prices.

Rising Gold Prices Could Increase Redemption Costs

The ₹55,000 crore liability estimate for FY26 appears conservative, as it does not fully account for fluctuations in gold prices at the time of redemption. Between 2015 and July 2024, average gold prices have surged by 171%, and the trend has continued upward. Given this trajectory, the actual redemption cost for the government could be significantly higher than current projections.

Conclusion

With a long redemption timeline stretching to 2032 and continued gold price appreciation, the government’s strategy for managing SGB liabilities will be crucial in the coming years.

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