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June 1, 2024

RBI Transfers 100 Tonnes of Gold from the UK to India: A Boost to Domestic Reserves

The Reserve Bank of India (RBI) has made a significant move by transferring over 100 tonnes of gold from the UK to its domestic vaults in India. This marks the first substantial addition to India’s locally held gold reserves since early 1991, according to a report by the Times of India (TOI). The RBI’s decision underscores the evolving strategy in managing the nation’s gold assets and reflects India’s economic resilience and strategic planning.

As of the end of March this year, the RBI’s total gold reserves stood at 822.1 tonnes, with 413.8 tonnes stored overseas. This recent transfer is part of a broader trend among central banks worldwide to accumulate gold, enhancing their financial stability. In the last financial year alone, the RBI acquired 27.5 tonnes of gold, solidifying its position among the top central banks increasing their gold holdings.

Traditionally, a portion of India’s gold reserves has been stored with the Bank of England, a practice dating back to pre-Independence days. However, with the recent increase in overseas gold holdings, the RBI decided to reassess its storage strategy. An official quoted in the report stated, “The 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 stock was building up overseas, it was decided to get some of the gold to India.”

This move is not just about logistics but also holds significant symbolic value. Gold is deeply ingrained in the cultural and emotional fabric of India, especially since the Chandra Shekhar government pledged gold to address a balance of payments crisis in 1991. Approximately 15 years ago, the RBI purchased 200 tonnes of gold from the International Monetary Fund (IMF), and since then, there has been a steady accumulation of gold reserves by the Indian central bank.

A source mentioned in the report highlighted the strategic importance of this transfer, stating, “It shows the strength of the economy and the confidence, which is in sharp contrast to the situation in 1991.” Indeed, the current economic landscape, characterized by robust growth and stability, contrasts sharply with the crisis-ridden early 1990s.

In facilitating this transfer, the RBI received a customs duty exemption for importing the gold, which the report describes as the government ‘foregoing revenue’ on a sovereign asset. However, the integrated goods and services tax (GST), applicable to imports and shared with the states, was not exempted. This nuanced approach balances fiscal considerations with the strategic need to bolster domestic gold reserves.

Transporting such a substantial amount of gold required meticulous planning and execution. A special aircraft was used, accompanied by comprehensive security measures to ensure the safe transit of the precious cargo. This initiative also aims to reduce some of the storage expenses associated with holding gold at the Bank of England, providing a cost-effective solution for the RBI.

Currently, gold within India is stored in secure vaults located in the RBI’s former office building on Mint Road in Mumbai, as well as in Nagpur. These facilities are equipped to handle the nation’s valuable reserves, ensuring their safety and accessibility.

In summary, the RBI’s transfer of 100 tonnes of gold from the UK to India marks a significant milestone in the management of the country’s gold reserves. This move not only strengthens India’s economic position but also reflects a broader trend among central banks to enhance their financial resilience through increased gold holdings. As India continues to grow and evolve, such strategic decisions play a crucial role in underpinning the nation’s financial stability and economic confidence.

Read more latest news on R9 News

Jhumpa Lahiri

Jhumpa Lahiri

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