RBI doubles gold share in reserves amid volatility

The Reserve Bank of India has doubled the share of gold in its foreign exchange reserves over the past four years, with gold now accounting for 11.70% of total reserves as of end-March. The RBI’s gold holdings rose to 879.59 metric tonnes, with a notable portion stored abroad.

The Reserve Bank of India (RBI) has reported that the share of gold in the country’s foreign exchange reserves has doubled over the past four years as of end-March. In dollar terms, gold accounted for approximately 11.70% of total forex reserves by March-end, up from 9.32% at end-September 2024 and 5.87% at end-March 2021, according to the central bank’s latest half-yearly forex reserves report.

As of March-end, the RBI’s total gold holdings stood at 879.59 metric tonnes, marking a rise from 854.73 metric tonnes held in September. Of this, the gold held domestically increased slightly to 511.99 metric tonnes from 510.46 metric tonnes at September-end, the report noted. “While 348.62 metric tonnes of gold were kept in safe custody with the Bank of England and the Bank for International Settlements (BIS), 18.98 metric tonnes were held in the form of gold deposits,” the RBI added.

Central banks usually maintain gold reserves as a strategic tool to diversify their foreign assets, enhance financial stability, and manage macroeconomic risks. Gold is also considered an effective hedge against inflation and exchange rate volatility. Globally, central banks have been increasing their gold purchases in response to ongoing uncertainties in financial markets and currency movements.

On a related note, the RBI highlighted a rise in certain external vulnerability indicators. The ratio of short-term debt to reserves climbed from 19.1% in September 2024 to 22% by December. Similarly, the ratio of volatile capital flows to reserves rose to 74.3% at the end of December 2024, compared to 67.8% at the end of the previous quarter.