100 plus tonnes of gold moves from BoE vaults to RBI; another consignment in the plans

In a move that has been described as logistical, RBI has brought more than 100 tonnes of gold from England to its vaults in India, The Times of India has reported. It has also said, quoting officials who preferred to remain anonymous, that another consignment will be moved again in the near future.

Like many central banks of the emerging economies, the RBI too has boosted its gold reserves lately. Between January and March this year, RBI has bought 19 tonnes of gold, wrote the World Gold Council in a note. The amount is almost 19% more than the entire quantity it bought in the 12 months of calendar years 2023. In FY24, RBI added 27.5 tonnes of gold to its reserves.

At the end of FY24, RBI had a total stock of 822.1 tonnes of gold. Of this amount, 50.33%, or 413.8 tonnes were stored abroad. Significantly, for RBI as indeed with several other central banks of the world, Bank of England has traditionally been the storehouse. A large part of the precious metal has been kept in the vaults of the central bank of England from pre-Independence days.

An official told the newspaper, “RBI started purchasing gold a few years ago and decided to undertake a review of where it wants to store it, something that is done from time to time. Since stock was building up overseas, it was decided to get some of the gold to India.”

Inside the country, RBI stores its gold reserves in the vaults of its old office building on Mumbai’s Mint Road and Nagpur.

The purchase of gold by a central bank has always been an economic question. However, in 1991, when the Centre had to pledge gold in a desperate measure to tackle the critical balance of payment crisis, it became an emotional issue and the Chandra Shekhar govt had to face criticism for the decision.

In 2009, RBI purchased 200 tonnes of gold from IMF for Rs 31,490 crore (or $6.70 billion) under the IMF’s limited gold sales programme. Since then, RBI had quietly shored up stocks. “It shows the strength of the economy and the confidence, which is in sharp contrast to the situation in 1991,” said an official.

However, moving more than 100 tonnes of gold from the UK to India is a logistical nightmare and had to be executed through long planning and coordination between the Union finance ministry, RBI, other arms of the Indian government as well as the British administration.

A special aircraft was required to transport the large quantity of the precious metal after working out detailed security arrangements. Interestingly, the asset entering Indian shores was treated as a sovereign asset and, therefore, customs was not paid on it. However, integrated GST had to be paid since it is charged on imports.

The movement of the gold from the vaults in England to India will also save the RBI storage cost.