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Fixed deposits (FDs) and Sovereign Gold Bonds (SGBs) are both attractive investment options that carry low risk. FDs have been considered one of the safest investment options in India for a long time. However, since their introduction in 2015, SGBs have been drawing attention because of the Gold Monetization Scheme rolled out by the Indian Government.
Fixed deposits are investment schemes offered by banks and Non-banking Financial Institutions (NBFCs). Whereas, Sovereign Gold Bonds are a type of financial instrument and are issued by RBI. SGBs are essentially mandated certificates issued in denominations of grams of gold.
To better understand the sovereign gold bond vs fixed deposit comparison, here’s how they measure up against each other.
Parameters |
Sovereign Gold Bonds (SGBs) |
Fixed Deposits (FDs) |
Returns |
Returns are linked to gold’s appreciation in the market; additional guaranteed returns of 2.50% p.a. offered |
Fixed returns on the basis of the interest rate offered by the issuer |
Risk |
Possibility of capital loss in case the gold prices go down |
Low-risk investment |
Liquidity |
Lower liquidity; subject to a lock-in period |
Certain FDs allow premature withdrawal, subject to a penalty charge |
Lock-in Period |
SGBs come with a mandatory lock-in duration of 8 years |
Tax-saver FDs are subject to a lock-in period of 5 years |
Assured Interest |
The interest income is disbursed on a semi-annual basis. |
The invested amount earns interest at a fixed rate throughout the tenor. |
Senior Citizen Benefits |
All investors, irrespective of their age, get the same interest rate |
Some issuers offer additional interest rates to this group |
Accessibility |
Individuals, trusts, HUFs, universities, charitable institutions are all eligible to buy SGBs |
Eligibility criteria may differ across issuers |
Tax Benefits |
If you hold SGBs till maturity, they are exempt from tax |
Tax deduction of up to ₹1.5 Lakhs u/s 80C of the Income Tax Act, 1961, for tax-saver FDs |
Disclaimer: The information is subject to change as per the policies of the government or financial institutions.
The sovereign gold bond vs fixed deposit debate is a long-standing one. As both options offer great returns and carry relatively low risk, it could be a tough choice to make. So, your decision depends on your risk tolerance and financial goals, among other factors. Compare the features of SGBs and FDs and choose one that best matches your requirements.
On Bajaj Markets, you can invest in investment options like the Bajaj Finance FD or SGBs and browse other options to find the best fit for you. Remember to assess all your financial needs and dreams carefully to find the right FD for you.
Frequently Asked Questions
What are Fixed Deposits?
An FD is an investment for a specific tenor that earns interest on the deposited amount at a fixed rate.
Can I withdraw or reinvest my FD?
You can withdraw your FD or reinvest it; both options are available. If you withdraw it before maturity, there is a certain penalty.
What is a Sovereign Gold Bond (SGB)?
SGBs are government securities with denominations in grams. They act as substitutes for physical gold. The RBI issues these bonds in tranches and you have to pay the issue price to acquire them.
What are the risks associated with SGBs?
Since the bond value is directly linked to the gold rate prevailing in the market, a decline in the price may result in capital loss. However, your invested units are secure and you will get the amount once you redeem the units at maturity.
What are the risks associated with FDs?
A limitation of FDs is that you need to pay tax on interest earned on FDs. The TDS rate depends on the tax bracket you fall under. However, in case of bankruptcy, the Deposit Insurance and Credit Guarantee Corporation insures up to ₹5 Lakhs per depositor for bank issued FDs.
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