Gold bars. Source: FILE/REUTERS.
In a first since early 1991, over 100 tonnes (1 lakh kilograms) of gold have been moved by the Reserve Bank of India (RBI) from the UK to its vaults in India.
A report by Times of India quoted official sources as saying in the coming months, a similar quantity of gold may head into the country.
How RBI’s gold reached UK?
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. Approximately a third is stored domestically. According to the latest annual data, as on March 31, 2024, RBI had 822.1 tonnes of gold, up from 794.63 tonnes held during the same period last year.
Of the total 822.1 tonnes of gold that central bank had in March 2024 end, 413.8 tonnes was overseas.
Why RBI chose Bank of England?
Bank of England has traditionally been the storehouse for most number of central banks. For India it is no different as some stocks of the country’s yellow metal is lying in London from pre-Independence days.
How RBI shifted its gold from UK to its vault?
Getting gold back to RBI’s vault was an extensive logistical exercise.
It began with months of planning, followed by precise execution and close coordination between the finance ministry, RBI and several other departments of government as well as local authorities.
The RBI had to get a customs duty exemption to ship the precious metal into India with the Centre “foregoing revenue” on what is a sovereign asset.
However, there was no exemption from integrated GST (goods and services tax), which is levied on imports, as the tax is shared with the states.
Also, a special aircraft was used to bring back the bulk quantity of gold with adequate security arrangements put in place.
Why shifting gold from UK helps RBI?
Shifting gold to its own vault will help RBI save storage costs that it pays to the Bank of England.
The ToI reported quoted an official saying, “RBI started purchasing gold a few years ago and decided to undertake a review of where it wants to store it, something that is done from time to time.”
“Since stock was building up overseas, it was decided to get some of the gold to India,” the official further said.
Where will the gold be stored now
RBI keeps the gold is in vaults in its old office building on Mumbai’s Mint Road as well as Nagpur.
‘India now holds most of its gold’
“While no one was watching, RBI has shifted 100 tonnes of its gold reserves back to India from UK,” prominent economist Sanjeev Sanyal was quoted as saying by India Today.
“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,” Sanyal added.
Why RBI moved gold from UK in 1991?
In 1991, the then Indian government-led by prime minister Chandra Shekhar was facing a severe balance of payments crisis after which it pledged to raise funds.
Between July 4 and 18, 1991, the 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 central bank 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.
The RBI in the recent years has been persistently building up its gold reserves.
The strategy behind holding gold is primarily to diversify RBI’s foreign currency assets, hedging against inflation, and mitigating foreign currency risks.
Since the December of 2017, the RBI has been regularly acquiring gold from the market. As a result, the share of the metal in India’s total foreign exchange reserves increased from 7.75 per cent at December 2023 end to about 8.7 per cent by April 2024 end.
Umang Sharma is a media professional with over 12 years of experience. Crafting compelling content and using storytelling techniques are his strengths. His interest lies in national, global, political news and events. see more
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