Synopsis: As of April 2024, the Reserve Bank of India (RBI) has increased its gold reserves to 827.69 tonnes, relocating over 100 tonnes from the UK to its domestic vaults for the first time since 1991. This move is part of a broader strategy to diversify foreign exchange reserves, hedge against inflation, and mitigate currency risks.
As of April 26, 2024, the RBI held 827.69 tonnes of gold as part of its foreign exchange reserves, up from 803.6 tonnes at the end of December, according to the latest data.
Over half of the RBI’s gold reserves are kept overseas in secure custody with the Bank of England.
Recently, the Reserve Bank of India (RBI) relocated over 100 tonnes of gold from the UK to its domestic vaults.
Sources told Business Today that more gold is likely to be repatriated, with decisions made annually.
This is the first instance since 1991 of gold being added to the domestic stock.
In addition to the Bank of England, a significant portion of the RBI's gold reserves is held by the Bank of International Settlements, with about a third stored within India.
This move will also save the RBI storage costs paid to the Bank of England.
According to the annual data released by the RBI, as of March 31, 2024, the central bank held 822.10 tonnes of gold as part of its foreign exchange reserves, up from 794.63 tonnes during the same period last year.
In 1991, the Chandra Shekhar government pledged gold to address a balance of payments crisis, with the RBI pledging 46.91 tonnes to the Bank of England and the Bank of Japan between July 4 and 18, 1991, to raise $400 million.
Around 15 years ago, the central bank purchased 200 tonnes of gold from the International Monetary Fund (IMF).
In 2009, under the UPA government led by Prime Minister Manmohan Singh, India bought 200 tonnes of gold valued at $6.7 billion to diversify its assets.
Over the last few years, the RBI has steadily increased its gold holdings through market purchases since December 2017.
The share of gold in India's total foreign exchange reserves rose from 7.75 percent at the end of December 2023 to about 8.7 percent as of the end of April 2024.
Domestically, gold is stored in vaults at the RBI’s building on Mumbai’s Mint Road and in Nagpur.
According to a World Gold Council report, global central banks hold about 17 percent of all the gold ever mined, with reserves totalling 36,699 metric tonnes (MT) as of the end of 2023, with the majority acquired in the last 14 years after becoming net buyers of gold in 2010.
In conclusion, the Reserve Bank of India's strategic relocation of over 100 tonnes of gold from the UK to its domestic vaults marks a significant move in bolstering its foreign exchange reserves.
This action, the first of its kind since 1991, underscores the RBI's ongoing efforts to diversify its assets, hedge against inflation, and mitigate foreign currency risks.
The steady increase in gold reserves, facilitated by regular market purchases since December 2017, has elevated the gold's share in India's total foreign exchange reserves.
By repatriating more gold, the RBI not only strengthens its domestic reserves but also reduces storage costs.
This strategic management aligns with global trends, where central banks have increasingly become net buyers of gold over the past decade, securing approximately 17 percent of the world's gold reserves.
Related Questions
1. What was the RBI's gold reserve as of April 26, 2024, and where is a significant portion of it kept?
As of April 26, 2024, the RBI held 827.69 tonnes of gold as part of its foreign exchange reserves, with over half of it kept overseas in secure custody with the Bank of England.
2. What recent action did the RBI take regarding its gold reserves?
Recently, the Reserve Bank of India (RBI) relocated over 100 tonnes of gold from the UK to its domestic vaults.
3. How has the RBI's gold reserve management changed since 1991?
This is the first instance since 1991 of gold being added to the domestic stock, with over 100 tonnes of gold repatriated from the UK.
4. How does the RBI's gold reserve management align with global trends?
Over the last few years, the RBI has steadily increased its gold holdings through market purchases since December 2017, aligning with global trends where central banks have become net buyers of gold.
5. What impact does the RBI's gold reserve management have on storage costs?
This move will save the RBI storage costs paid to the Bank of England, contributing to more efficient reserve management.
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