The Reserve Bank of India RBI shifts 100 tonnes of gold from UK to India to its domestic vaults. It marks the first time at least since early 1991 when the precious yellow metal at this scale has been added to the stock held locally, according to a RBI report.
The Indian central bank will also be bringing more similar quantity of gold’s to the country in the coming months, according to the report. The report, citing sources, said the transfer to India was for logistical reasons and for diversified storage.
Background of RBI’s Gold Holdings :
At the end of March 2024, the Reserve Bank Of India held 822.10 tonnes of embossed, of which 408.31 tonnes were held domestically.
Central banks globally have been increasing reserves held in embossed, often seen as a hedge against currency volatility and geopolitical risks.
The RBI decided to move gold to India as the stock was building up overseas, TOI reported.
According to the latest note by the World Gold Council (WGC), the RBI bought 19 tonnes of gold in the first quarter of the current calendar year 2024 (Q1-CY24 / Q4-FY24). This dwarfs the 16 tonnes of gold it bought in the whole of 2023.
The RBI started buying embossed in the calendar year 2018. Before that, it had purchased 200 tonnes in 2009 during the global financial crisis.
Implications of the RBI’s Transfer of Gold :
Are you wondering what the Implications of the RBI gold in India are? here are some-
Economic Signal: The transfer of 100 tonnes of embossed back to India from the UK will send a powerful message to global markets about India’s robust economic state and policies. It can be committed to safeguarding its financial assets. Reserve Bank Of India sent a message to manage its assets securely, by choosing to store a significant portion of its embossed reserves domestically. This move reassures international investors and financial markets that RBI or India is serious about their assets and maintains financial stability and protection from potential risks.
Enhanced Security: Storing embossed in India will enhance security by reducing the risks associated with holding it in foreign countries. There are risks to holding the embossed abroad like Geopolitical tensions, changes in international relations, and financial sanctions. If anything occurs, there is a possibility of freezing the gold. RBI wants to bring the embossed back to India to reduce the risks and ensure that the assets are under direct national jurisdiction. After transferring the gold to India, embossed is now subject to Indian laws and regulations. Hence, this movement enhances the overall security of the RBI’s Gold.
Increased Confidence: To transfer the RBI reserve embossed back in India, will boost confidence among both domestic and international stakeholders. Moreover, This increased confidence can attract more foreign investment, contributing to economic growth and stability.
Some Question’s (FAQ’s):
Why does the RBI store gold in foreign countries or banks?
During the 1990-91 foreign exchange crisis, Indians transferred the gold reserve to the Bank of England to secure about 405 million loans. However, the loan was repaid to the country in November 1991, but still, the Reserve Bank Of India decided to keep the embossed in the UL for logistical reasons. Gold stores abroad can still be used for trading on the stock market and gaining returns. There was no harm in keeping reserve gold in foreign countries. In addition, RBI also purchases more embossed from UK.
What significant move has the RBI recently made regarding its embossed reserve ?
The Reserve Bank Of India has moved over 100 tonnes of gold from the UK to its domestic vaults. This marks the first time since at least 1991 that such a large quantity of embossed has been added to the stock held locally.
Why is this move significant?
This is significant because it signals a shift in the RBI’s strategy for managing its embossed reserves. It is the largest such repatriation since the early 1990s and suggests a focus on logistical efficiency and diversified storage.
How does this action relate to global trends among central banks?
Central banks globally have been increasing their embossed reserves as a hedge against currency volatility and geopolitical risks. The Reserve Bank Of India’s actions align with this trend, showcasing a preference for holding tangible assets like embossed during uncertain times.
What potential future actions could the RBI take following this move?
The Reserve Bank Of India may continue to repatriate more embossed to India, further increasing the quantity of embossed held domestically. This would be in line with their strategy of logistical efficiency and diversifying storage locations, potentially reducing costs and enhancing economic security.
