RBI is filling India’s treasury with 50 ton more gold worth Rs 40000000000 to save country from…
Sun Jan 05 2025
We all have seen media reports talking about the fall of the Indian Rupee in the global currency market and also noted that India’s central bank, the Reserve Bank of India, has been increasing its gold reserves at significant levels. However, do you know that there is a possible connection between the two economic events? Reports have it that the RBI is adopting a strategy to increase the purchase of gold in order to stop the further fall of the Indian Rupee.
RBI’s plan to buy Gold
As a part of its policy, it has been reported that the RBI is prepared to complete the target of buying a total of 50 tonnes of gold worth Rs 40000000000 in a year by 2025.
The Reserve Bank of India (RBI) had also relocated 102 tons of gold from the Bank of England’s vaults to India only a few months back. Moreover, a latest data released by RBI said that the gold reserves held domestically increased to 60 per cent of the total holding as of 30 September, 2024 compared to 50 per cent at the end of March, 2024.
Although there is no conclusive evidence which indicates why the Reserve Bank of India is increasing its gold storage on a large scale, reports have indicated that it might be due to the changing geopolitical conditions leading to risk of changing the price of the currency amid the arrival of Donald Trump as the next President of United States. Also, India has the 1991 economic crisis lesson where it had to manage with forex reserves for only 15 days of import and 87 tonnes of gold.
India’s foreign exchange reserves continue to decline, extending downhill journey for three months now.
In the week that ended December 27, the country’s foreign exchange kitty declined by USD 4.112 billion to USD 640.279 billion, data from the Reserve Bank of India (RBI) showed.
India’s forex reserves have slumped twelve out of the past 13 weeks, hitting a fresh multi-month low.
The reserves had been falling ever since it touched an all-time high of USD 704.89 billion in September. Effectively, they are now about 10 per cent lower from the peak. The reserves have been declining likely due to RBI
intervention, aimed at aggressively preventing a sharp depreciation of the Rupee.
The latest RBI data showed that India’s foreign currency assets (FCA), the largest component of forex reserves, stood at USD 551.921 billion. Gold reserves currently amount to USD 66.268 billion, according to RBI data. Estimates suggest that India’s foreign exchange reserves are sufficient to cover approximately one year or near about of projected imports.
Source: https://www.india.com/