Gold Matters

The Reserve Bank of India has shifted around 100 tonnes of its gold kept in bank vaults in the UK to its own vaults in India in a move aimed at saving storage costs. This is a very significant development in that this is the first time since 1991 that India has undertaken such a large-scale overseas transfer of gold reserves. According to well-known economist Sanjeev Sanyal, who also happens to be a member of the PM’s Economic Advisory Council, while no one was watching, the RBI has shifted 100 metric tonnes of its gold reserves back to India from the UK. It is important to note that most countries keep their gold in the vaults of the Bank of England or some other location and pay a fee for the privilege. But, with the shifting of the gold back to the country, India will now hold most of its gold in its own vaults. In fact, as has been pointed out, India has come a long way since it had to ship out gold overnight in the midst of a crisis way back in 1999. Looking back, one can say that the shipping out of India’s gold in 1990–91 was a moment of failure that nobody can ever forget. It is in this context that this recent shipment of gold back to the country has a special meaning, as has been pointed out. It may be recalled that in 1991, India’s government was compelled to pledge the country’s gold in order to raise funds. landed in such a situation that while it was in the grip of a severe foreign crisis, there was no money to pay for essential imports. It was then that the Chandra Shekhr government was compelled to pledge the country’s gold in order to raise funds. The RBI had then pledged over 46.91 metric tonnes of gold to the Bank of England and the Bank of Japan in order to secure funds worth 400 million US dollars. Under normal circumstances, more than half of the RBI’s gold reserves are held overseas in secure custody with the Bank of England and the Bank of International Settlements, while approximately a third is stored in the RBI’s own vaults in Nagpur and Mumbai. According to reports, the RBI held 822.10 metric tonnes of gold as part of its foreign exchange reserves as of March 31, 2024, which, according to the annual data released by the RBI, is an increase from the 794.63 metric tonnes held at the same time last year.