Business

IIE DIGITAL DESK : The strategic move to bolster India's financial resilience amid global economic uncertainties, the Reserve Bank of India (RBI) significantly increased its gold reserves by 57.5 tonnes during the financial year 2024–25 (FY25). This addition marks the second-highest annual gold purchase by the central bank since 2017, reflecting a proactive approach to diversifying the nation's foreign exchange reserves.

As of March 31, 2025, the RBI's total gold holdings stood at 879.59 metric tonnes, up from 822.10 metric tonnes a year earlier. This accumulation aligns with a broader global trend where central banks are augmenting their gold reserves to hedge against currency volatility and geopolitical risks.

The RBI's gold acquisitions were strategically timed during a period of significant appreciation in gold prices, which surged by approximately 30% over the fiscal year. Consequently, the value of India's gold reserves escalated to $78.17 billion, a substantial increase from $52.67 billion in the previous year. This surge elevated gold's share in the country's total foreign exchange reserves from 9.32% at the end of September 2024 to about 11.70% by March 2025.

In addition to augmenting its gold reserves, the RBI undertook a notable repatriation of gold from overseas vaults. During FY25, the central bank brought back 38.64 tonnes of gold to India from the Bank of England and the Bank for International Settlements (BIS). This move is part of a broader strategy to increase domestic storage of gold, enhancing the security and accessibility of these assets. Over the past two years, the RBI has repatriated a total of 88.60 tonnes of gold, underscoring its commitment to strengthening the domestic custody of the nation's bullion reserves.

However, the pace of gold repatriation slowed in the latter half of FY25, with only 1.53 tonnes brought back between September 2024 and March 2025, compared to 102.15 tonnes in the preceding six months. This deceleration may reflect logistical considerations or a strategic decision to balance domestic and international storage of gold assets.

The RBI's current gold holdings are distributed as follows: 511.99 metric tonnes are stored domestically, 348.62 metric tonnes are held in safe custody with the Bank of England and the BIS, and 18.98 metric tonnes are maintained as gold deposits. This distribution indicates a significant shift towards increasing the proportion of gold stored within India, enhancing the central bank's direct control over these assets.

This strategic accumulation and repatriation of gold are reflective of the RBI's broader objectives to diversify India's foreign exchange reserves and mitigate risks associated with global economic volatility. By increasing its gold holdings, the central bank aims to provide a stable and secure foundation for the nation's financial system, ensuring greater resilience against external shocks.

Furthermore, the RBI's actions align with global trends, as central banks worldwide have been increasing their gold reserves. According to the World Gold Council, central banks added a net total of 1,045 tonnes of gold in 2024, marking the third consecutive year of net purchases exceeding 1,000 tonnes. This global accumulation underscores the enduring value of gold as a safe-haven asset in times of economic uncertainty.

 the RBI's substantial addition of 57.5 tonnes of gold to its reserves in FY25, coupled with the repatriation of 38.64 tonnes to India, signifies a deliberate strategy to fortify the nation's financial stability. These measures not only enhance the security and diversification of India's foreign exchange reserves but also position the country to better navigate the complexities of the global economic landscape.