|
Getting your Trinity Audio player ready...
|
The RBI Gold Bond Scheme refers to Sovereign Gold Bonds, or SGBs. These are government gold bonds where each unit stands for one gram of gold. They pay 2.5% interest a year, have an 8-year tenure and come with a sovereign guarantee from the Government of India. Fresh issuance has been paused since February 2024, but older series still trade on NSE and BSE.
Imagine your aunt has been buying a gold coin every Diwali for the last 20 years. She tucks each one into a velvet pouch and adds it to her bank locker. The collection has grown nicely with rising gold prices, but it doesn’t earn her a single rupee. She pays locker rent, worries about theft and loses a chunk in making charges every time old coins get converted to new jewellery.
Now imagine she could have bought paper gold that tracks the same gold price, pays interest twice a year, costs nothing to store and is backed by the Indian government. That’s exactly what the RBI Gold Bond Scheme offered Indian savers for nearly a decade. This guide walks you through what it is, how it works and why it still matters in 2026.
What Is the RBI Gold Bond Scheme?
The RBI Gold Bond Scheme is the official name for Sovereign Gold Bonds (SGBs). It was launched in November 2015 under the Gold Monetisation Scheme.
Each bond is priced in grams of gold. Buy one bond and you own the right to one gram of gold at the issue price. At maturity 8 years later, you get back the current market value of that gram, plus 2.5% interest paid every year along the way.
These are paper gold instruments. You don’t get a physical coin, just an entry in your demat account. The RBI issues them on behalf of the government, which is why they’re also called government gold bonds. They sit under the broader family of gold backed bonds in India.
Start investing with just ₹10K & grow your wealth with fixed return opportunities.
Invest Now
Why the Government Created RBI Gold Bonds
India is the world’s second-largest gold consumer. Households here hold over 25,000 tonnes of gold, mostly as jewellery sitting unused in lockers.
The government wanted to give Indians a way to own gold without actually buying the metal. Less gold gets imported and more household savings move into productive financial assets. For close to nine years, the scheme worked. Urban investors poured money in as a safe, long-term gold investment.
Related Post
- Gold Price and Bond Market in India: Understanding the Relationship in 2026
- RBI Gold Bond Scheme Explained: A Simple Guide for 2026
- Are Gold Backed Bonds Safe? A Simple Guide for Investors in 2026
How RBI Gold Bonds Earn Returns
Returns from this gold bond investment come from two places.
First, you get 2.5% interest every year. It’s paid in two halves, every six months, straight into your bank account. Not huge, but it’s a steady stream of interest income that physical gold simply doesn’t pay.
Second, your bond value rises with the gold price. If gold goes up, your bond is worth more at maturity.
A real example makes this concrete. The SGB 2020 series was issued at a gold bond price of ₹5,051 per gram. When it came up for premature redemption in April 2026, the price was ₹15,254. That’s a 202% gain over six years, plus 2.5% interest every year. The bond requires no active management over the tenure.
Safety and the Sovereign Guarantee
Each bond carries a sovereign guarantee. In plain words, the Indian government promises to pay the gold value at maturity. There is no NBFC default risk and no issuer that can default on the payment. The credit risk is that of the Government of India.
The main risk is gold prices falling. If gold drops 20% over your holding period, your redemption value falls too. The 2.5% interest still gets paid.
Tax Treatment Under Budget 2026
This is the part most investors miss. Budget 2026 quietly rewrote the capital gains tax rules on these bonds.
The 2.5% interest was always taxable at slab rate. Nothing has changed there.
The big shift is at maturity. Earlier, if you held an SGB till the 8-year mark, the capital gains were fully tax-free. Investors loved this. Budget 2026 narrowed that exemption.
Here’s how it stands now:
- Investors who bought directly from RBI before 1 April 2026 still get tax-free maturity
- Anyone who bought after that date, or from the secondary market, pays capital gains tax at maturity based on the stock exchange acquisition price and the final RBI redemption price
- Selling early on the exchange always attracts capital gains tax (12.5% if held over 12 months, without indexation)
So the tax-free exit, once the scheme’s biggest draw, is now restricted to old direct subscribers.
How to Buy RBI Gold Bonds Today
Here’s the catch. The RBI has not issued a fresh tranche since February 2024. The Finance Ministry admitted the scheme had become too expensive, since gold prices rose much faster than they had budgeted for.
You can’t apply for new RBI Gold Bonds today. But you can buy older series on the secondary market, the part of the stock exchange where existing bonds trade between investors.
Must Read: Sovereign Gold Bond Scheme: Discontinued for New Issues
To buy an online gold bond from the existing SGB stock:
- Log into your demat account on your broker’s app or website
- Search for “SGB” to see listed series on NSE and BSE
- Check the current trading price (close to but not exactly the gold rate)
- Place a buy order like any other listed bond
Liquidity varies across series, but most have decent volume.
RBI Gold Bonds vs Other Gold Investment Options
Here’s a simple side-by-side.
| Option | Returns | Income | Backing |
| RBI Gold Bonds | Gold price + 2.5% | Half-yearly | Sovereign guarantee |
| Gold Loan Backed Bonds | Up to 13.5% fixed | Regular interest | Collateralized bonds, gold pool |
| Gold ETFs | Gold price only | None | Fund company |
| Physical Gold | Gold price minus making charges | None | You |
Each option works differently. RBI Gold Bonds combine gold price exposure with 2.5% half-yearly interest and a sovereign guarantee. Gold Loan Backed Bonds pay fixed coupons up to 13.5%, backed by an NBFC’s gold loan pool rather than the gold price itself. Gold ETFs track the gold price without paying any interest. Physical gold also tracks the price but carries making charges and storage considerations. The right fit depends on whether the investor wants fixed income, gold price participation, or direct metal exposure, and on the level of credit risk they are comfortable with.
Risks to Consider Before Investing
Even with the sovereign guarantee in place, a few things deserve attention.
- Gold prices can fall. Your bond value moves with the metal
- Limited liquidity. Not every series trades actively
- Long lock-in. Premature redemption only kicks in from year 5, on interest payment dates
- Capital gains tax now applies to most new buyers, weakening one of the scheme’s main attractions
RBI Gold Bond Scheme FAQs
No. Fresh issuance has been paused since February 2024. Existing series still trade on NSE and BSE.
Yes. Any listed SGB series can be bought through your demat account, just like any other bond on the exchange.
No. RBI Gold Bonds are sovereign-backed and tied to gold prices. Gold Loan Backed Bonds are NBFC NCDs with fixed coupons. The names sound similar but the two work very differently.
Older tranches with lower issue prices, such as the 2016 and 2017 series, saw the largest gains because gold was cheaper at issue. The 2020 series, issued at ₹5,051 per gram, also rose sharply as gold prices climbed over its tenure. Returns depend on the issue price and how gold performed during the holding period.
RBI Gold Bond Scheme: Final Take for Investors
The RBI Gold Bond Scheme combines gold price exposure, half-yearly 2.5% interest and a sovereign guarantee, with zero storage cost. Fresh issuance has been paused since February 2024, so new positions can only be built through the secondary market. Budget 2026 narrowed the tax-free maturity exemption, so post-April 2026 buyers face capital gains tax at maturity. The choice depends on the investor’s gold view, tax slab, and the rest of their fixed-income allocation.
Ready to Invest?
Visit GoldenPi to explore current gold bond options. Compare yields, ratings and tenures in one place and invest online with as little as ₹10,000.
Disclaimer:
This information is for general information purposes only. GoldenPi makes no guarantee on the accuracy of the data provided here; the information displayed is subject to change and is provided on an as-is basis. Nothing contained herein is intended to or shall be deemed to be investment advice, implied or otherwise. Investments in the securities market are subject to market risks. Read all the offer-related documents carefully before investing.
Fixed Deposit schemes are regulated by the Reserve Bank of India. GoldenPi Securities Private Limited is a registered debt broker and acts as a distributor and not as a manufacturer of the product.
