RBI Boosting Gold in the Foreign Reserves

RBI Boosting Gold in the Foreign Reserves

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May 11, 2023

As a component of the diversifying effort and as a safeguard against growing global financial volatility, the RBI has been boosting its gold reserves. The RBI has 794.64 metric tonnes of gold as of fiscal year 2023, an increase of approximately 5% from fiscal year 2022. Of the entire 794.64 metric tonnes of gold, 437.22 tonnes are stored in safe custody overseas with the Bank of England and the Bank of International Settlements (BIS), while 301.10 tonnes are retained locally. The country's overall foreign exchange stockpiles was at USD 578.449 billion as of March 31, 2023, with gold reserves at USD 45.2 billion. As the world's instability grows, central banks throughout the world are expanding their gold reserves.

Why is the RBI boosting the gold in its reserve of foreign exchange reserves?

               • Long-term advantages - Because gold is a stable, reliable, and liquid resource, it has advantages over the long term.

               • Diversification - As global volatility grows, the RBI is broadening its foreign exchange reserves.

               • Negative rates - To rectify previous negative rates.

               • Dollar - Because the dollar has been declining, gold may be a viable alternative.

               • Transparency - Because gold has a consistent international price, it is transparent.

               • Lack of trust in Swiss financial centres as a result of Credit Suisse's downfall and the entire loss of its AT1 bonds.

Why is gold significant in foreign exchange reserves?

               • Currencies that are linked to the commodity - When portrayed in the context of commodity-linked Currencies, gold has done a better job.

               • Climbing gold price - The price of gold has risen faster than the price of the US dollar.

               • Unstable global financial system - Because of increased turbulence, the global financial system is projected to confront many crises.

               • Long-Term Foundations for the Rupee - Gold reserves, together with a healthy economy, balanced current account deficit, and solid balance of payments, establish the long-term foundations for the Rupee.

Source - The Indian Express