How is the price of SGB determined?

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...

ScenarioResolution
The market price is below the issue priceThis 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 volatileConsider staggering investments across multiple issues to average out costs.
You don’t receive interestEnsure your bank details are correctly updated in your Demat account.
You sell bonds in the secondary marketYou forfeit future interest payments; the buyer receives them.
You are unsure if you are eligible to investCheck 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