Summary :
India's central bank has relocated approximately 100 tonnes of gold from the UK to its domestic vaults, with further transfers planned, according to a report. This major move, the first of its kind since 1991, addresses concerns regarding logistical efficiency and storage diversification. The RBI, which held 822.1 tonnes of gold as of March, worked closely with various government agencies and utilized special aircraft for secure transport.
India's central bank has transferred approximately 100 tonnes, or 1 lakh kilograms, of gold from the United Kingdom to its vaults in India, with plans for additional transfers in the coming months, according to a TOI report on Friday.
The RBI faced significant criticism in 1991 when it had to pledge part of its gold reserves during a foreign exchange crisis. This marks the first time since then that India has moved such a large quantity of gold.
Sources informed TOI's Siddhartha that this transfer was carried out for logistical reasons and to diversify storage. Domestically, the gold is stored in vaults located in the RBI's old office building on Mumbai's Mint Road and in Nagpur.
"RBI began purchasing gold a few years ago and decided to review its storage locations, a routine practice," an official quoted in the report said. "With stock accumulating overseas, it was decided to bring some of the gold back to India."
"It demonstrates the strength of the economy and the confidence, which is a stark contrast to the situation in 1991," a source said.
For many central banks, the Bank of England has traditionally served as a repository. India is no exception, with some of its gold reserves stored in London since before Independence.
As of the end of March, the RBI held 822.1 tonnes of gold, with 413.8 tonnes stored overseas, according to data. The RBI is among the central banks that have been purchasing gold in recent years, adding 27.5 tonnes in the last financial year.
The RBI's appetite for gold has increased significantly, with the central bank buying 1.5 times more gold between January and April 2024 than in the entire year of 2023. This move is seen as part of a strategic diversification of reserves during challenging times.
How did the RBI pull it off?
Given the security and logistical concerns, moving such a large quantity of gold required months of meticulous planning and precise execution. To put it in perspective, 100 tonnes of gold constitutes nearly a quarter of India’s total stock as of the end of March.
The operation required close coordination between the finance ministry, the RBI, and various other government departments, including local authorities.
Initially, the RBI obtained a customs duty exemption to bring the gold into the country, with the central government "foregoing revenue" on this sovereign asset. However, there was no exemption from integrated GST, which applies to imports and is shared with the states.
Transporting such large quantities of gold necessitated the use of a special aircraft and comprehensive security arrangements. This initiative will also allow the RBI to reduce some storage costs paid to the Bank of England, although the savings are not significant.
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