How is SGB price determined and how is interest calculated/paid?
Sovereign Gold Bonds (SGBs) provide investors with two forms of value: price appreciation linked to gold prices, and a fixed interest income paid semi-annually. Here’s how both components work.
1. Issue price at subscription
- The Government of India determines the initial issue price in consultation with RBI.
- It is based on the average closing price of gold (999 purity) published by the India Bullion and Jewellers Association (IBJA) over the last three working days before the subscription period.
Example:
For SGB Series IV of FY 2022–23, the issue price was ₹5611 per gram.
2. Market price after listing
Once SGBs are listed on NSE/BSE, their price fluctuates based on:
- Global and domestic gold prices
- Prevailing interest rates
- Inflation expectations
- Demand and supply in the bond market
Note: The market price may be above or below the issue price.
3. Interest calculation and payment
- Rate: Fixed at 2.5% per annum
- Basis: Calculated on the initial investment value (issue price × grams applied)
- Frequency: Paid semi-annually (twice a year)
- Mode: Credited directly to the bank account linked with your Demat
Example:
If you invest ₹10,00,000 in an SGB issue:
- Annual interest = ₹10,00,000 × 2.5% = ₹25,000
- Paid as ₹12,500 every six months
What if...
| Scenario | Resolution |
|---|
| The market price is below the issue price | This is normal due to trading dynamics. If held till maturity, you still receive the face value plus 2.5% annual interest. You can also redeem your SGBs on FYERS. |
| You want to invest when gold prices are volatile | Consider staggering investments across multiple issues to average out costs. |
| You don’t receive interest | Ensure your bank details are correctly updated in your Demat account. |
| You sell bonds in the secondary market | You forfeit future interest payments; the buyer receives them. |
| You are unsure if you are eligible to invest | Check this article to know who can invest in SGBs. |
Holding SGBs till maturity ensures you receive both the prevailing gold value at redemption and the cumulative 2.5% interest. If you plan to apply, see this article for a step-by-step guide. Last updated: 26 Sep 2025
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