India’s sovereign gold bond (SGB) program, launched in 2015 to reduce gold imports and provide cost-effective borrowing, has backfired spectacularly. The government’s liabilities on SGBs have skyrocketed by 930% in just six years, with outstanding liabilities for 132 tonnes of gold out of 147 tonnes issued across 67 tranches as of March 2025. This has resulted in potential losses estimated at $13 billion, effectively creating a massive naked short position for the government. The financial strain has become so severe that the government is now considering discontinuing the SGB scheme altogether, highlighting the unintended consequences of a program designed to manage gold demand and government borrowing
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