According to the reports, India tends to bring in 100 metric tonnes of its gold reserves from UK out of its original holding of 822.10 metric tonnes from the Bank of England by June 2024. As we know many countries such as Italy, Germany or USA do keep their monetary or Gold reserves abroad for coordinated storage or due to security reasons.
This time this event marks the biggest foreign import since 1991 when a significant amount of gold was bought in to tackle a foreign exchange problem. However, India does contain another 408 metric tonnes of gold domestically- 308 metric tonnes as collateral for running notes and the left over 100.28 metric tonnes as departmental asset for the banking sectors.
But why did India retain its gold in UK even after the colonial loot?
In 1990, India faced a severe financial issue as foreign exchange due to which it needed a hefty sum of 405 million dollars as loan from the United Kingdom as a favor of which India exchanged a portion of its gold holdings in return. The loan was cleared by India within November 1991 yet India choose to keep its gold holding considering logistic issues.
We might thing that the access to our gold holdings abroad might be difficult for the RBI, but its the reverse! RBI specially purchases gold from foreign markets, carries out transactions, trades, swaps much more easily when its reserve is storage aboard.
However, the most crucial threat to such holding arises only when there falls a strain between the two countries. For example, Russian assets were froze during the Russia Ukraine war by the Bank. This might stand has a big reason as to why RBI tends to bring out all its gold reserves soon from abroad to avoid such unpredictable circumstances. Further, The RBI can rather use this gold to regulate gold prices nationally.
