Why in the News?
The Reserve Bank of India (RBI) reported that India’s gold reserves surpassed $100 billion for the first time in history, reaching $102.365 billion in the week ending October 10, 2025.
India’s Gold Reserves and Composition (2025):
Distribution of Gold Holdings (March 2025):
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What are Gold Reserves?
- A gold reserve is the gold held by a country’s central bank, acting as a backup for financial promises and a store of value.
- India, like other nations, stores some of its gold reserves in foreign vaults to spread out risk and facilitate international trading.
- India’s Gold Reserves:
- As of the end of March 2024, the RBI held 822.10 tonnes of gold, with 408.31 tonnes stored domestically.
- The share of gold in the total forex of India is around 7-8% as of 2023.
Where does the RBI store its gold?
- India’s gold reserves are primarily stored in the Bank of England, which is known for its stringent security protocols.
- The RBI also stores a portion of its gold reserves at the:
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- Bank for International Settlements (BIS) in Basel, Switzerland, and the
- Federal Reserve Bank of New York in the United States.
| During India’s foreign exchange crisis in 1990-91, the country pledged some of its gold reserves to the Bank of England to secure a $405 million loan, according to reports.
Even though the loan was paid back by November 1991, India decided to keep the gold in the UK for convenience. |
Why does the RBI store its gold in foreign banks?
- Convenience: Storing gold overseas makes it easier for India to trade, engage in swaps and earn returns.
- Averting Risks: There are risks involved, especially during times of geopolitical tensions and war.
- The recent freezing of Russian assets by Western nations has raised worries about the safety of assets kept abroad and the RBI decision to shift a portion of the gold reserve to India could be prompted by these concerns.
- Stable Prices: Unlike fiat currencies, which can be subject to inflation or devaluation due to various economic factors, the value of gold tends to be relatively stable over time, which makes it an attractive asset for central banks to hold as a reserve.
Benefits Offered by Gold Reserves
- Control domestic gold prices: With its big stash of gold, the RBI can help control local gold prices by using some of it in India. Last financial year, the RBI added about 27.47 tonnes of gold to the total reserve, bringing it to 794.63 tonnes.
- Security buffer: The increased gold reserve works as a hedge against any financial crisis and to take measures to control inflation as well as currency devaluation.
| [UPSC 2015] The problem of international liquidity is related to the non-availability of:
(a) Goods and services (b) Gold and silver (c) Dollars and other hard currencies * (d) Exportable surplus |
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