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RBI Gold Holdings And Foreign Exchange Reserves: In the fiscal year 2023-24, the Reserve Bank of India (RBI) witnessed a remarkable increase in its gold reserves, with an addition of 27.46 metric tonnes. This surge brought RBI’s total gold reserves to 822.10 metric tonnes by the end of March 2024, accounting for approximately 8.15% of the total foreign exchange reserves. This increase indicates a strengthening of India’s gold holdings compared to the previous year.
Trends in Central Bank Gold Buying
The World Gold Council has observed a consistent trend of central banks increasing their gold reserves, despite recent fluctuations in gold prices. While some central banks may choose to remain cautious due to price surges, others are actively adding to their reserves. The Council suggests that the ongoing trend of central bank gold buying is likely to continue, albeit with some variability among different banks.
Composition of RBI’s Gold Holdings
RBI’s gold reserves are distributed across various locations and forms. As of March 2024, out of the total gold holdings, 408.31 metric tonnes are held within India, while 387.26 metric tonnes are stored in safe custody with the Bank of England and the Bank for International Settlements (BIS). Additionally, 26.53 metric tonnes are held in the form of gold deposits. This diversification of holdings ensures security and liquidity for RBI’s gold assets.
Reserve Adequacy Metrics
RBI’s foreign exchange reserves covering imports have shown significant improvement, increasing from 9.3 months to 11 months by December 2023. This indicates enhanced reserve adequacy, providing greater stability to India’s external finances. Moreover, the ratio of short-term debt to reserves has decreased from 23.0% to 20.3%, while the ratio of volatile capital flows to reserves declined from 72.7% to 70.4% during the same period. These metrics reflect a healthier balance in India’s reserve management.
Allocation of Foreign Currency Assets (FCA)
As of March 2024, RBI’s foreign currency assets (FCA) amounted to $570.95 billion, with $468.99 billion invested in securities, $62.17 billion deposited with other central banks and the BIS, and $39.79 billion held as deposits with commercial banks overseas. This allocation strategy ensures a balanced and diversified portfolio, optimizing returns while maintaining liquidity and security.
Conclusion
RBI’s increased gold reserves in fiscal year 2023-24 reflect its commitment to diversifying and strengthening India’s foreign exchange reserves. Despite fluctuations in gold prices, central banks, including the RBI, continue to recognize the value of gold as a stable asset. With improved reserve adequacy metrics and a well-allocated portfolio of foreign currency assets, RBI is well-positioned to navigate global economic challenges and ensure the stability of India’s financial system.
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