The Reserve Bank of India (RBI) has moved approximately 100 tonnes of gold from the United Kingdom to its vaults in India, reports said. This is the first time since 1991 that India has undertaken such a large-scale transfer of gold reserves.
More than half of the RBI’s gold reserves are held overseas in secure custody with the Bank of England and the Bank of International Settlements, while approximately a third is stored domestically.
The move is expected to help the RBI save on storage costs currently paid to the Bank of England. The central bank held 822.10 tonnes of gold as part of its foreign exchange reserves as of March 31, 2024, an increase from the 794.63 tonnes held at the same time last year, according to the annual data released by the RBI.
"Most countries keep their gold in the vaults of the Bank of England or some such location (and pay a fee for the privilege). India will now hold most of its gold in its own vaults. We have come a long way since we had to ship out gold overnight in 1991 in the midst of a crisis," economist Sanjeev Sanyal said.
"For those of my generation, the shipping out of gold in 1990-91 was moment of failure that we will never forget. This is why this shipping back of gold has a special meaning," he added.
In 1991, facing a severe balance of payments crisis, the Chandra Shekhar government pledged gold to raise funds. Between July 4 and 18, the Reserve Bank of India (RBI) pledged 46.91 tonnes of gold with the Bank of England and the Bank of Japan, securing $400 million.
Around 15 years ago, the RBI purchased 200 tonnes of gold from the International Monetary Fund (IMF) under the United Progressive Alliance (UPA) government led by Prime Minister Manmohan Singh, diversifying its assets with a $6.7 billion investment. In recent years, the RBI has consistently built up its gold reserves.
The central bank's strategy of holding gold is primarily aimed at diversifying its foreign currency assets, hedging against inflation, and mitigating foreign currency risks. Since December 2017, the RBI has regularly acquired gold from the market.
As a result, the share of gold in India's total foreign exchange reserves increased from 7.75% at the end of December 2023 to about 8.7% by the end of April 2024.
