Why India Secretly Flew Its 200 Tons Of Gold Stored In England Back Home

(October 30, 2024 - Sanjeev Sanyal)

The Reserve Bank of India (RBI) has shifted a whopping 102 tons of its gold from the Bank of England to secure locations within the country. This comes months after bringing back 100 tons of the precious metal from the UK in May. But what’s behind this move?

RBI announced that it relocated 102 tons of gold from the Bank of England’s vaults to secure facilities within India. This is in addition to the 100 tons it relocated in May.

Most Indians purchase gold and welcome it into their homes, on the belief that it will bring good luck. Perhaps, it’s the same for the Reserve Bank of India. The country’s central bank announced that it has brought back to India another 102 tons of gold, which were kept in safe custody in the Bank of England and the Bank for International Settlements.

This news comes after the RBI made a similar announcement back in May when it said that it had moved 100 tons of gold — the most significant gold repatriation since the 1990s.

As the gold makes a homecoming, we analyze why the precious metal was kept overseas and what are the reasons for bringing it home now.

How much gold was brought back?

The RBI, according to a Times of India report, relocated 102 tons of gold from the Bank of England’s vaults to secure facilities within India. The RBI carried out the transportation of the yellow metal amid complete secrecy and detailed security measures, including specialized aircraft and secure protocols.

The yellow metal has now been stored at safe locations within India. Traditionally, India’s gold is stored at RBI’s vaults in Mumbai and Nagpur.

Interestingly, this movement of gold comes after a similar mission had been carried out in May, bringing back 100 tons of gold from the UK. At the time, it was reported that it was one of the largest gold relocations since the 1990s.

With this move, India’s current total gold reserves stand at 854.73 tons of which 510.5 tons is held domestically. Of the 344.23 tons that are overseas, 324.01 tons of gold is kept in safe custody with the Bank of England and the Bank for International Settlements (BIS), while 20.26 tons are held in the form of gold deposits.

Why was this gold kept abroad?

Most countries store some of their gold reserves in foreign vaults to spread out risk and facilitate international trading. For India, besides the Bank of England, it stores gold reserves at the Bank for International Settlements (BIS) in Basel, Switzerland, and the Federal Reserve Bank of New York in the United States.

This gold was moved to the Bank of England in 1990 amidst the country’s foreign exchange crisis. At the time, PM Chandra Shekhar’s government was in power at the Centre and the country’s balance sheet was a mess. The country’s central bank had less than $1 billion in forex reserves, barely enough to meet import requirements for three weeks.

Amid this financial crisis, RBI Governor S Venkitaramanan presented the idea of raising money from international banks by offering gold as collateral. Realizing this was a practical step, in May 1991, the government decided to lease smuggled gold confiscated by customs to the State Bank of India which, in turn, sold it to a Swiss bank to raise $200 million. The RBI then negotiated with the Bank of England and the Bank of Japan for an additional loan of $400 million, which would be secured by the gold collateral.

The Bank of England has one of the world’s largest gold vaults. It is reported that the vaults hold around 400,000 bars of gold.

So, why bring back so much gold now?

Bringing the gold home has great significance attached to it. Bringing the gold home in recent times — from May — is a reflection of India’s economic growth and a belief in this growth story. When India moved the precious metal abroad, the country’s economy was in the doldrums. But not anymore. As the Times of India reports, this transfer is an indication of India being strengthened in the economy.

Sanjeev Sanyal, an economist, said that India holding most of its gold is reflective of “the long way since we had to ship out gold in 1991”. According to him, the shipping out of gold in 1990-91 was a moment of failure that “we will never forget”. “This is why this shipping back of gold has a special meaning,” he said.