Recently, the Reserve Bank of India (RBI) decided to bring back 100 tonnes of gold from the United Kingdom. This move raises several questions: Why does India keep its gold reserves abroad, and why is it bringing them back now? Keep reading to know!
What’s Happening?
According to the RBI’s annual report released on May 30, 2024, the Reserve Bank of India took a significant step in FY24 by bringing back 100 tons of gold from the UK’s vaults. This is the largest amount of gold repatriated since 1991, and there are plans to bring back more gold in the coming months.
The report states that as of March 2024, India had a total gold reserve of 822.10 metric tonnes. Out of this, 308 metric tonnes are held as security for issuing notes, and 100.28 tonnes are held locally as assets in the banking department. Additionally, 413.79 metric tonnes of gold are stored abroad.
Why Does RBI Keep Gold Abroad?
Market Convenience: Places like the UK have a liquid market for gold. Here, gold can be easily used for trade and swaps, and the RBI can earn returns on it.
Risk Mitigation: Keeping gold in various countries reduces the risk of unforeseen events such as wars or political unrest in any one location.
Crisis Assistance: During the foreign exchange crisis of 1990-91, India had to pledge some of its gold reserves with the Bank of England to secure a $405 million loan. The loan was repaid by November 1991.
Why is the Gold Being Brought Back?
Reducing Foreign Storage Costs: Storing gold abroad incurs storage and security costs. To reduce these expenses, the RBI is bringing some of the gold back.
Economic Security: Recent incidents, such as Western countries freezing Russian assets, have raised concerns about the security of assets held abroad. India aims to ensure greater security by bringing its gold back.
What Does This Mean for Investors?
Many people might wonder if bringing the gold back will impact India’s economy. The answer is – no. Repatriating the gold will not affect India’s GDP, gold prices, tax collection, or the RBI’s balance sheet, as India already owns this gold. The RBI is simply relocating its gold from the UK to India.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
*Disclaimer: Teji Mandi Disclaimer
