Reserve Bank of India (RBI) has transferred 100 metric tonnes of gold stored overseas back to its own vaults in India. This marks one of the largest physical movements of the precious metal by the central bank since the balance of payments crisis in 1991 forced India to pledge some reserves with the Bank of England.
According to the RBI’s latest annual report for FY2024, the shift has increased domestically held gold to over 408 tonnes, almost at par with the 413 tonnes still left abroad. The repatriation appears aimed at mitigating risks highlighted during the Russia-Ukraine conflict, when Western sanctions froze Russian assets globally.
RBI’s Total Gold Reserves Inch Towards 823 Tonnes
As per latest figures, the RBI currently holds total gold reserves of 822.1 tonnes, of which 308 tonnes back the currency in circulation as asset backing. The remaining is held by the RBI’s banking department as a reserve asset on its balance sheet.
In just the first four months of 2024, the central bank purchased one and a half times the gold it did in all of 2023, signaling more aggressive accumulation.
The stepped up gold buying follows global trends of central banks moving away from dollar-denominated assets and towards the safety of gold to hedge against inflation and financial volatility.
As per US Treasury data, foreign central banks’ investment in US bonds has fallen from 49.8% in March 2023 to 47.1% in March 2024.
Rationale Behind RBI’s Overseas Gold Storage
Historically, a portion of India’s gold reserves has been stored in the UK for convenience during overseas trade and transactions. The 1990s crisis loans taken using gold as collateral were repaid, but the RBI continued keeping a large chunk of reserves with the Bank of England for ease of operations.
But geopolitical uncertainties have now prompted the shift back home. A sizeable quantity of gold domestically helps RBI greater control in using the asset to smoothen domestic gold prices via gold-backed ETFs and related instruments.
This move to repatriate gold mirrors global trends of central banks opting for greater self-reliance in managing their bullion stockpiles as part of their currency stabilization strategies.
Clearly, RBI’s upgrading policies on purchasing more gold and also holding it within India points towards reducing risks and maintaining strategic flexibility to use gold during financial emergencies. Recent transfer has struck a healthy 50:50 distribution between onshore & offshore reserves to optimize operational efficiency while still retaining control.
