RBI Repatriates 100 Tonnes of Gold from the UK

According to a TOI report, India’s central bank, the Reserve Bank of India (RBI), has repatriated 100 tonnes of gold from the United Kingdom (UK) and plans to bring more in the coming months. This significant move marks the first large-scale gold transfer since 1991, when India had to pledge its gold reserves during a foreign exchange crisis, and for this, RBI faced a lot of criticism.

As sources told TOI, logistical reasons and the need for diversifying storage drove the repatriation. Gold is stored domestically in RBI vaults in Mumbai and Nagpur. An official noted that a review prompted the decision to bring some back to India as overseas gold stocks accumulated.

Strength of the Economy

This move will strengthen the Indian economy and the RBI’s confidence, a sharp contrast to the situation in 1991. Historically, the Bank of England has been a repository for many central banks, including India, which has stored gold in London since before Independence.

Current Gold Holdings

As of March 2024, the RBI held 822.1 tonnes of gold, with 413.8 tonnes stored overseas. The RBI has been a consistent buyer of gold. It added 27.5 tonnes in the last financial year, and in the first four months of 2024, it purchased 1.5 times more gold than it did throughout 2023. This increased buying is part of a broader strategy to diversify the country’s reserves.

Execution and Logistics

Moving such a substantial quantity of gold required proper planning and coordination among various government departments, including the finance ministry, local authorities, and the RBI. The operation also involved obtaining a customs duty exemption to facilitate the import of gold, though integrated GST was still applied, as this tax is shared with the states. Transporting the gold requires the use of notable aircraft and stringent security measures.

Strategic Diversification

Approximately 15 years ago, the RBI bought 200 tonnes of gold from the International Monetary Fund. Since then, the Indian central bank has consistently increased its gold reserves through regular purchases. The RBI’s increased appetite for gold purchases is part of a strategic diversification of reserves to help in challenging times.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.