The Reserve Bank of India (RBI) has moved 100 metric tonnes of gold deposited in the Central Bank of England to India. As of March 2024, the RBI’s total gold reserves stand at 822.10 metric tonnes. A large chunk of this gold was stored abroad while the rest was in Indian vaults.

The movement of the 100 metric tonnes into India has taken the overall quantity stored locally to 408 metric tonnes of gold. Now, the foreign and local gold reserves are almost equal. This recent transaction is one of the largest movements of gold by India since 1991 when the nation pledged its gold reserves to tackle the foreign exchange crisis. One of the reasons for this transaction could be reportedly high storage costs at the Bank of England for gold reserves.

Over 308 metric tonnes of gold held in India is used to back the issued notes while another 100.28 tonnes is held locally as an asset for the banking department. As per the annual report, 413.79 metric tonnes of gold is held abroad. In 1991 when Chandra Shekhar’s government was in power at the centre, the country’s balance sheet was a mess. RBI was facing issues in paying the import bills.

To meet this shortfall, RBI had to mortgage 46.91 tonnes of gold with the Bank of England and the Bank of Japan, securing $400 million (Rs 33 billion) At that time, Manmohan Singh was the country’s finance minister. The loan was repaid by November 1991. However, the RBI chose to keep the gold in the UK for logistical reasons. Gold stored abroad can be easily used for trading, entering into swaps, and earning returns. The RBI also buys gold from international markets and storing it overseas facilitates these transactions.

Around 15 years ago, the RBI purchased 200 tonnes of gold from the International Monetary Fund (IMF) to diversify the country’s assets. Under the UPA government led by Prime Minister Manmohan Singh, the RBI invested $6.7 billion (Rs 559 billion). Since then, the Reserve Bank has been buying gold aggressively.

As per Business Insider, in the first four months of 2024, the RBI bought one and a half times the gold it acquired in the entire previous year. Data from the US Treasury Department shows that non-US central banks’ holdings of US Treasury bonds have dropped from 49.8% in March 2023 to 47.1% in March 2024.