Nearly half of the gold underlying Sovereign Gold Bonds (SGBs) is fully backed by government reserves at current gold prices, senior officials told CNBC-TV18. The sources said the Centre has provisioned enough funding in the Gold Reserve Fund (GRF) to cover redemptions of 60–65 tons out of the 130 tons of gold currently outstanding under SGBs.
This reserve provides complete redemption coverage for the next 4–5 years, offering a significant confidence boost to SGB investors.
“The SGB reserve fund, with prevailing gold price, will be able to cover redemption of 60–65 tons of gold in next 4–5 years,” a source said.
As of March 20, 2025, the government has issued 67 tranches of SGBs, amounting to 146.96 tons of gold, with 130 tons still outstanding, valued at Rs 67,322 crore at the time of reporting, according to Ministry of Finance data presented in Parliament.
To strengthen the GRF, the Centre allocated Rs 28,605 crore to the fund in FY25, marking a substantial rise from Rs 3,550 crore in FY24. For FY26, the budgetary allocation stands at around ₹700 crore.
The finance ministry had earlier clarified in Parliament that the GRF is used to credit the price and interest differential associated with SGBs. The reserve fund is part of a broader fiscal provisioning framework, which also includes the Guarantee Redemption Fund, Gold Monetisation Scheme, and the Senior Citizen Welfare Fund.
This move is aimed at ensuring stability and confidence in the Sovereign Gold Bond program, which continues to be a popular long-term investment option among Indian investors.
SGB redemption
Earlier this month, the Finance Ministry indicated that no further tranches of Sovereign Gold Bonds (SGBs) will be issued, even as the government prepares to redeem 130 tonnes of gold-backed bonds starting this fiscal year.
