🥇 SGB & GMS
Sovereign Gold Bonds and Gold Monetization Scheme 2026
Sovereign Gold Bonds (SGB)
Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold, issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They serve as an alternative to holding physical gold, eliminating concerns about storage, security, and purity while offering additional benefits like periodic interest income.
Key Points at a Glance
| Parameter | Details |
|---|---|
| Issuer | RBI (on behalf of Government of India) |
| Denomination | 1 gram of gold (minimum unit) |
| Interest Rate | 2.5% per annum (fixed, paid half-yearly) |
| Maturity Period | 8 years |
| Early Exit Option | Allowed after the 5th year (on interest payment dates) |
| Online Discount | ₹50 per gram for digital applications |
Eligibility
SGBs are available to a wide range of investors. The following entities are eligible to invest:
| Eligible Investors |
|---|
| Individuals (Single Name) |
| Joint Holders (any two persons) |
| Minors (through guardian) |
| Trusts |
| Charitable Institutions |
| Universities |
SLR Eligibility: Banks can count SGBs towards their Statutory Liquidity Ratio (SLR) requirements, subject to regulatory conditions. This makes SGBs attractive for institutional investors as well.
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Sovereign Gold Bonds (SGB)
Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold, issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They serve as an alternative to holding physical gold, eliminating concerns about storage, security, and purity while offering additional benefits like periodic interest income.
Key Points at a Glance
| Parameter | Details |
|---|---|
| Issuer | RBI (on behalf of Government of India) |
| Denomination | 1 gram of gold (minimum unit) |
| Interest Rate | 2.5% per annum (fixed, paid half-yearly) |
| Maturity Period | 8 years |
| Early Exit Option | Allowed after the 5th year (on interest payment dates) |
| Online Discount | ₹50 per gram for digital applications |
Eligibility
SGBs are available to a wide range of investors. The following entities are eligible to invest:
| Eligible Investors |
|---|
| Individuals (Single Name) |
| Joint Holders (any two persons) |
| Minors (through guardian) |
| Trusts |
| Charitable Institutions |
| Universities |
SLR Eligibility: Banks can count SGBs towards their Statutory Liquidity Ratio (SLR) requirements, subject to regulatory conditions. This makes SGBs attractive for institutional investors as well.
Issuing Agencies
SGBs are available through multiple channels for investor convenience:
- Scheduled Commercial Banks (excluding Small Finance Banks and Payment Banks)
- Post Offices (designated branches)
- Stock Holding Corporation of India Ltd.
- Authorised Stock Exchanges (NSE, BSE) – for secondary market trading
- Clearing Corporation of India Ltd.
Pricing
The price of SGBs is linked to the prevailing gold prices, ensuring transparency:
| Feature | Details |
|---|---|
| Issue Price | Simple average of the closing price of 99.9 % purity gold for the last 3 working days before the subscription period, published by IBJA (India Bullion and Jewellers Association) |
| Online Discount | ₹50 per gram less for investors applying online and paying digitally |
| Cash Purchase Limit | Up to ₹20,000 only; higher amounts require bank account or card payment |
Investment Limits
To ensure broad participation while preventing excessive concentration, the government has set investment limits:
| Category | Maximum Limit (Per Fiscal Year) |
|---|---|
| Individuals | 4,000 grams (4 kg) |
| Hindu Undivided Family (HUF) | 4,000 grams (4 kg) |
| Trusts & Similar Entities | 20,000 grams (20 kg) |
| Minimum Subscription | 1 gram |
Note: For joint holdings, the investment limit applies to the first applicant only. This means if A and B invest jointly, the investment is counted against A's 4,000 gram limit, while B's individual limit remains fully available for separate investments.
Interest & Returns
One of the key advantages of SGBs over physical gold is the periodic interest income:
| Feature | Details |
|---|---|
| Interest Rate | 2.5% per annum (fixed for the bond's tenure) |
| Payment Frequency | Half-yearly (credited directly to the investor's bank account) |
| Tax Treatment | Interest income is taxable under "Income from Other Sources" as per the investor's income tax slab |
Capital Gains Tax Benefit: If held until maturity (8 years), capital gains are fully exempt from income tax. This is a significant advantage over physical gold.
Maturity & Redemption
| Feature | Details |
|---|---|
| Original Tenor | 8 years from the date of issue |
| Premature Redemption | Allowed after 5 years from the issue date, on interest payment dates |
| Redemption Price | Simple average of the closing price of 99.9% purity gold for the 3 working days preceding redemption, as published by IBJA |
| Redemption Credit | Credited to the investor's registered bank account |
Other Features
SGBs come with several additional investor-friendly features:
1. Loan Facility
SGBs can be pledged as collateral for loans from banks and NBFCs. The Loan-to-Value (LTV) ratio is the same as applicable for ordinary gold loans under RBI guidelines. This allows investors to meet liquidity needs without selling their bonds.
2. Tradability & Transferability
- SGBs are transferable to other eligible investors through execution of a transfer deed.
- They are also tradable on recognized stock exchanges (NSE/BSE) after being listed, providing liquidity before the 8-year maturity.
- Trading allows investors to exit early at market prices (which may be higher or lower than the issue price depending on gold prices).
3. Nomination
- Investors can register up to 2 nominees at the time of application.
- In case of death of the bondholder, the nominee(s) can claim the bonds or request early redemption.
- Nomination can be updated by submitting a fresh nomination form to the issuing agency.
4. Agent Commission
- RBI pays a commission of ₹100 per 100 grams of SGB sold to distribution channels.
- This is shared 50:50 between the receiving office (bank/post office) and the distribution agent (if buy through an agent).
- Important: This commission is paid by the government, not by the investor—so there are no hidden charges for buyers.
Current Status
Both the Sovereign Gold Bond (SGB) scheme and the Medium/Long-Term components of the Gold Monetisation Scheme (GMS) have been discontinued for new subscriptions by the Government of India, effective March 2025. The government cited high borrowing costs as the primary reason.
What this means:
- ❌ No new SGB tranches are being issued for FY 2025-26 or beyond
- ❌ MTGD and LTGD (5-15 year deposits) are no longer accepting new deposits
- ✅ Existing investments remain valid and will run their full course until maturity
- ✅ STBD (1-3 year deposits) may still be offered by individual banks at their discretion
- ✅ Existing SGBs can still be traded on NSE/BSE through demat accounts
Despite the discontinuation of new issuances, existing SGBs remain fully functional:
| Aspect | Status |
|---|---|
| Existing Bonds | Continue to earn 2.5% annual interest; can be held until 8-year maturity or redeemed after 5th year |
| Secondary Market | Investors can buy and sell existing SGBs on NSE/BSE through demat accounts |
| Recent Redemption | SGB 2020-21 Series X: Premature redemption opened January 19, 2026 at ₹14,130 per unit |
Gold Monetization Scheme (GMS) 2015
The Gold Monetization Scheme (GMS) was launched in November 2015 with the objective of mobilizing idle gold lying with households and institutions and putting it to productive use. India has substantial gold holdings (estimated at 25,000+ tonnes), much of which remains locked away without generating returns.
Under GMS, customers can deposit their physical gold with designated banks and earn interest in rupees. This benefits depositors (who earn returns on otherwise idle assets) and the economy (by reducing gold imports).
Two Variants
GMS offers deposits under two broad categories:
| Variant | Full Form | Description |
|---|---|---|
| STBD | Short Term Bank Deposit | Managed by banks; shorter tenure options |
| MLTGD | Medium & Long Term Government Deposit | Managed by Government of India; longer tenures with higher interest |
Key Parameters
| Parameter | Details |
|---|---|
| Denomination | Physical gold (in any form – jewelry, coins, bars) |
| Interest Payment | In Rupees (for MLTGD variants) |
| Minimum Deposit | 10 grams (reduced from 30 grams w.e.f. 5th April 2021) |
| Maximum Deposit | No upper limit |
| Interest Calculation Basis | 360 days per year |
Purity Testing: Gold is assayed at Collection and Purity Testing Centres (CPTCs) to determine purity and net weight. The gold content (not gross weight) determines the deposit amount.
Maturity Periods
Different variants offer flexibility in tenure:
| Variant | Tenure Options | Premature Closure |
|---|---|---|
| STBD (Short Term) | 1-3 years (including broken periods) | At bank's discretion |
| MTGD (Medium Term) | 5-7 years (including broken periods) | After 3 years with interest penalty |
| LTGD (Long Term) | 12-15 years (including broken periods) | After 5 years with interest penalty |
Broken Period: Deposits can be made for terms other than exact years (e.g., 1.5 years, 2.5 years etc.). Repayment Options: Under the original scheme, depositors could choose to receive repayment in gold or equivalent cash value at maturity.
Interest Rates
Interest rates vary by deposit type:
| Variant | Interest Rate |
|---|---|
| STBD | At bank's discretion (banks set their own rates) |
| MTGD | 2.25% per annum |
| LTGD | 2.5% per annum |
| STBD Interest Payment Date | 31st March every year (credited annually) |
Bank Charges
Banks are compensated for handling and processing gold deposits:
| Charge Type | Rate |
|---|---|
| Handling Charges | 1.5% of the value of gold deposited |
| Commission | 1% of the value |
These charges are typically borne by the government and do not reduce the depositor's returns.
Loan Facility
Rupee loans are available against deposits under GMS. This allows depositors to access liquidity without breaking their deposit, similar to loans against fixed deposits.
Current Status (2025-26)
- MTGD & LTGD Discontinued -The Medium-Term and Long-Term Government Deposit components were discontinued from March 26, 2025.
| Component | Status |
|---|---|
| STBD (1-3 years) | May still be offered by individual banks at their discretion based on commercial viability |
| MTGD (5-7 years) | Discontinued – no new deposits accepted |
| LTGD (12-15 years) | Discontinued – no new deposits accepted |
| Existing Deposits | Continue until their original redemption date as per initial terms |
SGB vs GMS: Understanding the Fundamental Difference
Both schemes were launched together on November 5, 2015 alongside each other, with a shared goal — reduce India's demand for physical gold and channel domestic savings into financial assets. But they work in completely opposite directions:
The core difference is how you start:
- With SGB, you use cash to buy "paper gold" — you're investing fresh money into gold as an asset
- With GMS, you give the bank your actual physical gold (old jewelry, coins, bars) — you're putting idle gold to work
Think of it this way:
- SGB = "I want to invest in gold but don't want to buy physical gold"
- GMS = "I already have gold sitting in my locker doing nothing — let me earn interest on it"
Detailed Comparison
| Feature | SGB (Sovereign Gold Bonds) | GMS (Gold Monetisation Scheme) |
|---|---|---|
| How it works | You pay cash to buy bonds denominated in grams of gold | You deposit your existing physical gold with a bank |
| Physical gold needed? | No — purchased with cash/online payment | Yes — you must surrender actual gold |
| Minimum Investment | 1 gram | 10 grams |
| Maximum Limit | 4 kg for individuals/HUF; 20 kg for trusts | No upper limit |
| Interest Rate | Fixed 2.5% per annum (paid semi-annually) | Variable: 2.25% to 2.5% depending on tenure |
| Tenure | 8 years (exit option from 5th year) | 1-3 years (Short), 5-7 years (Medium), 12-15 years (Long) |
| Gold Purity | 999 purity (24 carat) — used as benchmark for pricing | Any purity accepted — gold is melted and tested at a CPTC |
| Tax on Capital Gains | Tax-free if held until maturity (8 years) | Entirely tax-free (no Capital Gains, Wealth, or Income tax) |
| Interest Taxation | Taxable under "Income from Other Sources" | Taxable under "Income from Other Sources" |
| Maturity Payout | Cash only (equivalent to market value of gold) | Choice of cash or physical gold (depending on variant) |
| Tradability | Yes — tradable on NSE/BSE stock exchanges | No — not tradable on exchanges |
| Loan Facility | Available (can pledge as collateral) | Available (rupee loans against deposit) |
| Current Status | Discontinued (no new issuances); existing bonds valid | MTGD/LTGD discontinued; STBD at bank's discretion |
| Best For | Investing in gold without physical hassle | Earning returns on gold already lying idle |
Which One Should You Choose?
Choose SGB if you want to invest in gold as an asset class without worrying about storage, purity, or making charges — and you want a guaranteed 2.5% extra annual income on top of any gold price appreciation. You can buy existing SGBs on the stock exchange even though new issuances have stopped.
Choose GMS if you already have idle gold sitting in a bank locker or at home and want to put it to productive use by earning interest — while also saving on locker rental fees.
Important Warning: If you deposit jewelry into the GMS, it will be melted at the testing centre to verify purity. You will not get your jewelry back in its original design. At maturity, you receive either gold bars/coins or the cash equivalent — not your original ornaments. This is irreversible, so only deposit gold you don't need in its current form.
Summary Cheat Sheet
| Concept / Topic | Key Details / Explanation |
|---|---|
| SGB Issuer | RBI on behalf of Government of India |
| SGB Denomination | In grams of gold (minimum 1 gram) |
| SGB Interest | 2.5% p.a. (fixed), paid half-yearly |
| SGB Maturity | 8 years; early exit after 5th year on interest payment dates |
| SGB Online Discount | Rs. 50 per gram for digital applications |
| SGB Individual Limit | 4,000 grams (4 kg) per fiscal year |
| SGB Trust Limit | 20,000 grams (20 kg) per fiscal year |
| SGB Pricing | Simple average of closing price of 99.9% purity gold for last 3 working days (IBJA) |
| SGB Cash Purchase Limit | Up to Rs. 20,000 only |
| SGB Capital Gains Tax | Fully exempt if held until maturity (8 years) |
| SGB Interest Tax | Taxable under "Income from Other Sources" |
| SGB Tradability | Tradable on NSE/BSE; transferable via transfer deed |
| SGB Loan Facility | Can be pledged as collateral; LTV as per RBI gold loan norms |
| SGB Nominees | Up to 2 nominees |
| SGB SLR | Banks can count SGBs towards SLR requirements |
| SGB Agent Commission | Rs. 100 per 100 grams, shared 50:50 (office & agent) |
| SGB Current Status | Discontinued for new issuances (March 2025); existing bonds valid |
| GMS Launch | November 2015 — mobilize idle gold from households |
| GMS Minimum Deposit | 10 grams (reduced from 30 grams w.e.f. 5 Apr 2021) |
| GMS Maximum Deposit | No upper limit |
| GMS STBD | 1-3 years; interest at bank's discretion; may still be offered |
| GMS MTGD | 5-7 years at 2.25% p.a. — Discontinued |
| GMS LTGD | 12-15 years at 2.5% p.a. — Discontinued |
| GMS Interest Calculation | Based on 360 days/year |
| GMS Purity Testing | Done at CPTCs (Collection and Purity Testing Centres) |
| GMS Bank Charges | Handling: 1.5%; Commission: 1% (borne by government) |
| GMS Tax | Entirely tax-free (no Capital Gains, Wealth, or Income tax) |
| SGB vs GMS Core Difference | SGB: Cash to paper gold (investing); GMS: Physical gold to interest (monetizing) |
| GMS Jewelry Warning | Gold is melted for purity testing — jewelry returned as bars/coins or cash, not original form |
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