RBI Transfers 100 Tonnes of Gold from UK to India: A Historic Move

In a significant development, the Reserve Bank of India (RBI) has successfully transferred approximately 100 tonnes (1 lakh kilograms) of gold from the United Kingdom to its vaults in India, marking the first such large-scale transfer since 1991. This strategic move is aimed at reducing storage costs and diversifying the location of its gold reserves, according to sources cited by Business Today and the Times of India.

This transfer highlights a marked shift in India’s approach to gold reserves since the early 1990s. Back in 1991, India faced a severe balance of payments crisis, which forced the Chandra Shekhar government to pledge 46.91 tonnes of gold with the Bank of England and the Bank of Japan to secure $400 million. The recent move by the RBI is a stark contrast to those desperate times, showcasing the strength and confidence of India’s current economic position.

As of March 31, 2024, the RBI held 822.10 tonnes of gold as part of its foreign exchange reserves, up from 794.63 tonnes the previous year. Historically, more than half of the RBI’s gold reserves have been held overseas, primarily with the Bank of England and the Bank of International Settlements. However, this transfer indicates a strategic shift towards holding a larger portion of these reserves domestically. Currently, India’s gold is stored in vaults located in the RBI’s buildings on Mumbai’s Mint Road and in Nagpur.

Prominent economist Sanjeev Sanyal commented on the move, emphasizing its significance for those who remember the economic crisis of the early 1990s. “For my generation, the shipping out of gold in 1990-91 was a moment of failure that we will never forget. This shipping back of gold has a special meaning,” he stated.

The logistics of transferring such a large quantity of gold were complex and required months of meticulous planning. The RBI coordinated closely with the finance ministry, various government departments, and local authorities to ensure the security and smooth execution of the transfer. Special aircraft and comprehensive security arrangements were employed to transport the gold, highlighting the operation’s scale and significance.

This move is part of the RBI’s broader strategy to diversify its foreign currency assets, hedge against inflation, and mitigate foreign currency risks. Since December 2017, the RBI has been regularly acquiring gold from the market, significantly increasing its reserves. The share of gold in India’s total foreign exchange reserves has risen from 7.75% at the end of December 2023 to about 8.7% by the end of April 2024.

Globally, central banks have become net buyers of gold since 2010, with total reserves reaching 36,699 metric tons by the end of 2023, according to a World Gold Council report. The RBI’s recent actions align with this global trend, reflecting a strategic diversification of reserves in challenging economic times.

In summary, the RBI’s decision to move 100 tonnes of gold back to India is a significant step that underscores the country’s economic resilience and strategic foresight. This move not only reduces storage costs but also symbolizes India’s journey from the economic crisis of 1991 to its current position of strength and confidence in the global financial landscape.