India is Bringing Back its Gold: Overseas Reserves Drop to Lowest in 6 Years

India’s gold reserves held overseas fell to 47% of the total by the end of March, the lowest since December 2017. The Reserve Bank of India (RBI) began repatriating gold to India in March 2022, following the Russia-Ukraine conflict, echoing global central banks’ caution after the US froze Russian assets. RBI Governor Shaktikanta Das attributed this move to sufficient domestic storage capacity and stressed against drawing further implications. As of March, RBI’s total gold holdings stood at 822.1 tonnes.

According to an ET report, a survey by Invesco in December 2023, involving 57 central banks and asset managers, revealed an increase in gold exposure 8-10 years ago, stored in London for swaps and yield enhancement. The survey noted a rising trend of central banks repatriating gold reserves, highlighting gold as a safe-haven asset. The share of central banks’ gold reserves held domestically rose from 50% in 2020 to an estimated 68% by December 2023, expected to further increase to 74% over the next five years.

Reflecting this trend, RBI’s domestically held gold increased from 39% in September 2021 to 53% by March 2024. This shift contrasts with 1991 when India pledged gold overseas to avoid payment defaults.

The relocation of 100 tonnes of gold, nearly 25% of India’s reserves as of March, required meticulous planning and execution over several months. The operation necessitated close collaboration among various government agencies including the finance ministry, RBI, and local authorities. The central government facilitated transportation by waiving customs duty, foregoing revenue on this national asset. However, Integrated GST, distributed among states.