What Led the RBI to Move 100 Tons of Gold from the UK?
The RBI has 822.10 metric tons of total gold reserves as of March 2024. A significant portion of the valuable asset is kept overseas. Like other nations, India had a holding with the Bank of England.
In FY24, the Reserve Bank of India (RBI) transferred 100 metric tons of gold that was kept in UK vaults to Indian vaults. One of India’s biggest gold transfers since 1991, when part of the country’s stockpiles were pledged to address a foreign exchange problem, occurs with this noteworthy transfer.
What is the amount of gold held by RBI?
The RBI has 822.10 metric tons of total gold reserves as of March 2024. A significant portion of the valuable asset is kept overseas. Like other nations, India had a holding with the Bank of England. With the 100 metric tons that were moved into India, there are currently approximately 408 metric tonnes of gold kept domestically, nearly evenly divided between local and international holdings.
According to the central bank’s annual report for FY24, which was made public on Thursday, more than 308 metric tonnes of gold are kept in India as collateral for notes that are issued, and an additional 100.28 tonnes are kept domestically as departmental assets for the banking sector. 413.79 metric tons of the total gold reserves are stored overseas, according to the annual report.
Why does the RBI keep its gold overseas?
In the past, India promised the Bank of England a portion of its gold holdings in order to obtain a $405 million loan during the foreign exchange crisis of 1990–91. For logistical considerations, the RBI decided to retain the gold in the UK even though the loan was paid back by November 1991. Gold that is kept overseas is readily available for trading, swapping, and profit-making. Additionally, the RBI purchases gold from foreign markets and facilitates these transactions by keeping it abroad.
There are hazards associated with storing gold abroad, especially when there are geopolitical tensions. Concerns regarding the security of assets stored overseas have increased as a result of Western countries freezing Russian assets. These worries are perhaps the reason behind the RBI’s recent decision to repatriate gold from the UK.
With so much gold, what will the RBI do?
The government and the RBI may collaborate to control local gold prices by using domestically held gold, particularly in light of the increased demand for investment products like as gold exchange-traded funds. This tactic keeps gold reserves inside the nation while supporting the growth of a strong local bullion market.
The Reserve Bank of India has increased the amount of gold it buys. The RBI purchased 1.5 times as much gold in the first four months of 2024 as it did in the entire year prior.
Part of the reason for this aggressive buying is that central banks throughout the world are becoming less confident in dollar assets. Non-US central banks’ holdings of US Treasury bonds have decreased from 49.8% in March 2023 to 47.1% in March 2024, according to data from the US Treasury Department.
The Reserve Bank of India (RBI) increased its holdings of gold from 794.63 tonnes to 27.47 tonnes in FY24. This action is a component of a larger plan to diversify foreign exchange holdings and act as a buffer against inflation and exchange rate fluctuations.
Because of market tactics, geopolitical concerns, and logistical considerations, the RBI maintains and manages gold reserves both locally and overseas.
The RBI’s strategy to protecting and using its gold assets is dynamic, as seen by the recent repatriation of gold from the UK.
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