New Delhi: The Reserve Bank of India (RBI) has repatriated approximately 100 tonnes of gold from the United Kingdom to its vaults in India. The central bank plans to continue this process in the coming months.
Sanjeev Sanyal, an economist and a member of the Economic Advisory Council to the Prime Minister of India, announced on Friday that India will now hold most of its gold in its vaults. “While no one was watching, RBI has shifted 100 tonnes of its gold reserves back to India from the UK,” Sanyal wrote in a post.
The gold in India is typically stored in vaults in the Reserve Bank of India’s (RBI) old office building on Mumbai’s Mint Road and in Nagpur. India now boasts significant foreign exchange reserves, capable of covering approximately 11 months’ worth of imports. Its gold reserves have also witnessed an upsurge.
This is the first time since 1991, when the country was grappling with a foreign exchange crisis, that India has transferred such a large quantity of gold. The RBI faced severe criticism at the time for being compelled to pledge part of its gold reserves.
An official quoted in the report stated, “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 the stock was building up overseas, it was decided to get some of the gold to India.”
The move is seen as a reflection of the strength of the economy and the confidence in it, contrasting sharply with the situation in 1991.
The Bank of England has traditionally served as a repository for many central banks, including India, which has stored some of its gold reserves in London since before Independence.
As of the end of March, the RBI held 822.1 tonnes of gold, with 413.8 tonnes stored overseas. The RBI has been among the central banks that have purchased gold in recent years, having added 27.5 tonnes in the last financial year.
The RBI’s appetite for gold has also increased recently, with the central bank buying 1.5 times more gold in January-April 2024 than in all of 2023. This is considered to be part of a strategic diversification of reserves in challenging times.
The RBI obtained a customs duty exemption to bring the metal into the country, although there was no exemption from integrated GST, which is applied to imports since this tax is shared with the states. Transporting large quantities of gold required a special aircraft and comprehensive security arrangements. This move will also enable the RBI to save on some storage costs paid to the Bank of England, although these savings are not substantial.
Gold has long been an emotional issue for most Indians, particularly since the Chandra Shekhar government pledged the precious metal during the 1991 balance of payments crisis. Although the RBI purchased 200 tonnes of gold from the International Monetary Fund about 15 years ago, the Indian central bank has steadily increased its gold reserves through consistent purchases over recent years.