The Reserve Bank of India (RBI) for the very first time has shifted approximately 100 tonnes of gold from the bank vaults of UK to its domestic vaults. As per the media reports, the bank took this move to save the storage costs of storing gold in a foreign bank.
Since 1991, this is for the first India has transferred such a large amount of gold reserves overseas. "While no one was watching, the RBI has shifted 100 tonnes of its gold reserves back to India from the UK," said a prominent member of the PM's Economic Advisory Council Economist Sanjeev Sanyal in his tweet.
He further added to his post that, majority of the countries store their gold in the vaults of the Bank of England, or some similar place, and pay a hefty amount as fees. “ 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."
Talking about the 1991 situation, when the government had to export its gold to foreign countries, Mr. Sanyal pointed out that "For those of my generation, the shipping out of gold in 1990-91 was a moment of failure that we will never forget. This is why this shipping back of gold has a special meaning."
While no one was watching, RBI has shifted 100 tonnes of its gold reserves back to India from UK. Most countries keep their gold in the vaults of the Bank of England or some such location (and pay a fee for the privilege). India will now hold most of its gold in its own vaults.…
— Sanjeev Sanyal (@sanjeevsanyal) May 31, 2024
According to a media report, the Reserve Bank of India will also be bringing back more gold reserves in the coming months. The motive behind this move is mainly storage and logistical reasons.
What does this Signify?
The huge shipment of gold reserves from England back to the country has many meanings behind it. This shows the current rising situation of the Indian economy. The major three implications are:
Cost Saving Initiative: By storing gold domestically, the RBI will not have to pay storage fees to international custodians like the Bank of England.
Expressing Confidence in the Indian Economy: Gold is often seen as safe haven for the economy by many countries, and recalling it back can be seen as an indication of RBI’s increasing confidence in the Indian economy.
Possibility of Additional Gold Repatriation: Pulling back gold from a foreign land can potentially mean the RBI's strategic approach to managing its foreign exchange reserves.
Timeline of RBI’s Strategy with Gold
Central Banks of many countries buy gold as their global investment during financial crisis. Banks have been increasing their gold reserves as a hedge against geopolitical risks and currency volatility. See the timeline given below to understand the RBI’s strategy with respect to gold reserves:
April 2024: RBI buys 24 tonnes of gold and increases its gold reserves to 827.7 tonnes.
December 2023: RBI loses 63.8 tonnes of gold, and only has 803.6 tonnes as gold reserves.
December 2022: RBI has the highest gold reserves with 867.4 tonnes
December 2021: RBI has 754.1 tonnes of gold reserves in bank vaults
December 2020: RBI has 676.7 tonnes gold reserves
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