Image Source: The Hindu Business Line
India's central bank has taken a drastic step towards its reserve management strategy, raising the proportion of gold in its forex reserves significantly over the last one year. Reserve Bank of India (RBI) currently possesses 879.59 metric tonnes (MT) of gold as of March 31, 2025, and 511.99 MT is kept domestically. This move was made during global economic uncertainties, volatility in the dollar, and an increase in gold prices.
Brief Introduction
The Reserve Bank of India has dramatically increased its gold reserves, raising the proportion of gold in the nation's overall forex reserves from 9.32% at September-end 2024 to 11.7% by March-end 2025. This policy step aligns with international trends, as central banks across the globe are trying to counterbalance currency risks and geopolitical risks by growing their gold holdings.
Key Points
Sharp Rise in Gold's Share of Forex Reserves
Gold's proportion of India's total forex reserves increased from 9.32% at September end 2024 to 11.7% at March end 2025, touching the highest level both quantum-wise and percentage-wise.
The RBI’s total gold holdings now stand at 879.59 MT, up from 822.1 MT a year earlier, reflecting a net addition of 57.5 tonnes in FY25-the second-highest annual increase since 2017.
Domestic Storage of Gold
Of the total 879.59 MT of gold held as part of forex reserves, 511.99 MT is stored domestically, highlighting a shift towards keeping a larger portion of reserves within India.
Global Context and Strategic Rationale
Central banks across the world, including India's RBI, are now resorting to adding more gold reserves to diversify away from traditionally dominant assets such as the US dollar and US Treasuries.
Dollar volatility and declining dollar index-from almost 110 levels in January 2025 below 100 levels currently-have rendered gold an increasingly attractive hedge.
Both the rise in gold prices (breaking ₹1 lakh per 10 grams during April 2025) and world geo-political uncertainties have further spurred RBI gold buying.
India's Global Gold Rankings
India is now the world's seventh-largest gold reserves holder, having moved from tenth position in 2015, and has been one of the most virulent central banks to amass gold since the pandemic.
The RBI was the second-largest buyer of gold for central banks in the fourth quarter of 2024.
Aims and advantages
The gold accumulation by RBI seeks to:
Diversify and make the forex portfolio more robust.
Offset currency and geopolitical risks.
Preserve the value of reserves, as gold retains purchasing power over time.
Higher domestic gold holdings also enhance India’s economic security and reduce exposure to external shocks.
Recent Trends and Outlook
While the RBI’s gold purchases have moderated in recent months, the strategic importance of gold in India’s reserves continues to grow.
Experts expect the trend of increasing gold reserves to persist, given ongoing global uncertainties and the outlook for gold prices.
Relevant Sources: Adda247, Economic Times, Rediff, World Gold Council/Goldhub, Times of India, The Hindu Business Line
Advertisement
Advertisement
