THE IMPORTANCE OF MAINTAINING GOLD RESERVE STOCKS (BY RBI, OF INDIA) INSIDE INDIA

THE IMPORTANCE OF MAINTAINING GOLD RESERVE STOCKS (BY RBI, OF INDIA) INSIDE INDIA


Dear Readers,

In recent days, there has been repeated and lot of news publications in public domain regarding, 100+ Metric Tonnes of Gold being moved to India by RBI from its Storage Abroad, more specifically in UK. 

The Gold Reserves maintained in the hands of RBI (Reserve Bank of India) are basically Sovereign Assets. The Assets of the Indian Nation, RBI is only the custodian of it. The Gold Reserves indicate the inherent strength of the "Monetary System" of the Nation. 

Why "Gold" is used as the Preferred Reserve Metallic Asset by the Nations as Sovereign Asset world wide, where as there are a number of other Precious Metals and Jewels that are much more valuable (expensive) in the market ...for example Platinum , Diamond  ... and other jewels you can name that are much more valuable and priced higher than Gold in the Global market ?

Precisely : 
1)      The Gold as a Precious Metal, has the highest level of Financial Liquidity over any other Precious Metals or Jewels in the World. 

2)        The Gold as a precious metal is available in highest volumes in the world, it is mined and processed in highest volumes among all other precious metals and jewels in the world. Therefore, it is easier to acquire a high volume of Gold Metal than any other Precious Metal or Jewel, even if a Nation can afford to pay for it, as the other Precious Metals and Jewels, even if they are more valuable than Gold are not available in such volumes to be acquired and stored as Sovereign Assets. 

3)         The Longevity of life of Gold is very high. The Gold as a Precious Metal can live a very long life without being affected or getting damaged. It will not corrode or get damaged easily hence can be stored for decades and even centuries without any loss of it. At the most some dust particles can get deposited over it over long period of time, you blow the dust, it is the same again. Those who may not know, only "Aqua Ragia" ( A 1:3 Molar Ratio Mixture of Concentrated Nitric Acid and Hydro-chloric Acid ) can dissolve Gold only when used over Gold Intentionally ). There is no other Chemical Substance in the World now, which can affect Gold otherwise. The Gold is also a softer metal, it can bend, it will not break easily to get damaged and be lost easily during just storage. 

4)        The Longevity of Life the Gold as a Precious Metal allows, possibly no other Previous Metal or Jewels can give, because they can get affected by various Chemical Substances and also they can break and lose the original form and parameters. 

5)          Even in case of fire, the Gold does not melt easily. the Melting Point of Gold is 1064 Degree Celsius ( which is highest among many other metals) , which can not happen  with ordinary household /commercial premises fire. 

6)        Acceptability of Gold Globally as a Precious Metal to be kept as a Reserve Metallic Asset and quick monetization possibility in case of need. Since Ancient Times, throughout the World, the Gold was used as the minted Currency Coins. It is a mint-able metal, it has been used as a minted currency coin over the world over the Centuries and ages. I have already said it has the highest financial liquidity in the world, if a Nation wants to liquidate Gold for its urgent financial need, it is possible easily. In recent years, the nation-Cyprus had liquidated quite good quantity of Gold out of its Gold Reserves. Even India had taken resort to Gold Reserves for the Forex Need in 1990s, it is well known. 

7)       Generally People across the Globe ( other precious metals and jewels are also done) like to Store Gold in households in the form of Jewelry or Bars or in different forms for themselves as future secured assets or for emotional satisfaction by beautification and wearable accessories. 

8)       Gold is not a harmful metal for storing, it will not cause any storage or environmental hazards. Gold is a very safe metal to store. Even if one swallows a piece of Gold it will not harm the body, unless it is very big piece that can block and obstruct getting stuck in the digestive channel of the body. It is a Non-Toxic metal, even it is used in preparation of certain medicines by various ways, whether traditional medicines like Ayurved or Modern Medicines. 

9 )       What I wrote above are some of the very important parameters for Gold being kept as Reserve Sovereign Assets by the Nation.  There could be many other reasons one can find out, let me admit what I have written above are not exhaustive reasons. 

How much of Gold right now the RBI ( Reserve Bank of India ) Stores as Gold Reserve for the Nation of India as Sovereign Assets of India :
As on 31-March-2024, the RBI (Reserve Bank of India) is Storing : 822.10 MTs of Gold 
Out of this Quantity as on 31-03-2024, 309.03 MTs is stored  Inside India and stored abroad 514.07 MTs.

How the Gold Reserves of RBI are being used or backed up: 
As on 31-03-2024, 309.03 MTs is stored  Inside India is committed by RBI as Back Up against the INR Currency (Notes) issued by RBI in India. It means for every Rupee of Currency Note issued by RBI, it is backed by equal (or more) value of Reserve Value in terms of Gold Asset ( as Sovereign Asset ). 

Why Gold Reserve Back up is being maintained by RBI Abroad : 
It is for various reasons of our International Commitments, Global Presence and showing our Global Strength to the World and for many other reasons, need not be said, it will be there. Ultimately when Gold is bought by RBI, like in last financial year 2023-24, 27.47 MTs of Gold was bought by RBI, it is always bought abroad, hence for some convenience reasons and also for many other reasons in the National Interest it is bought and stored abroad. 

The News of 100+MTs of Gold being moved by RBI to inside-India Storage is true as per public domain news reported but for the reasons it was moved is not disclosed in public, however the following could be the possible reasons:
1. Logistics and handling convenience by keeping inside India within reach of own hands. 

2. India is trying to make the Indian Rupee as a fully convertible currency and also one of the Reserve Currencies of the World, for International Trade and Commerce ... which is in National Interest and to reduce dependence primarily on USD. Until now USD, GBP, JPY and Euro are 4-reserve currencies and fully convertible currencies of the World ( primarily ). However, India is trying to add the INR to this list, very welcome efforts for the National Interest. ..... For this Reason, we may need more Reserve Gold to be stored inside India in our Hands, and not in others' places abroad. 

3.  There may be need to issue more Rupee Notes ( Rupee Currency ) in near future when the New Govt comes after June-04 or later to it as our Need may increase, when more Gold will be Needed inside India as Reserve Gold to back up such additional currency issued. 

4.   There may be any other reasons that should be known to RBI and Government of India, I can not postulate and speculate right now. 

There is news in public domain, that RBI may move further Gold Reserve to be kept inside India for logistics convenience or for whatever reasons in National Interest.... Welcome...

In support of the Numbers I quoted above I am giving the link of Money Control News item below or you can Read the RBI Annual Report 2023-24, to verify that it is true. 

MC Explains | How does RBI manage its gold reserves?

The Reasoning and Other Factor Reasons I said, I have written by my own knowledge and assessment of various positions including the position of RBI and National Interest involved for India ... as my Own Analysis for the Readers. 

With best regards,
Dr. Nimain Charan Biswal,
Mumbai, India 


About the Author: Dr. Nimain Charan Biswal is a B.Sc.(Agri. Science and Technology), M.B.A. and Ph.D.(Management Area ) by qualifications; and he has 38+ years of work experience in both industrial and development sectors in diversified fields of social importance. He has been educated at Orissa University of Agriculture and Technology (OUAT)-Bhubaneswar, Institute of Rural Management Anand (IRMA) and Gujarat University (with Resource Support of IIM-Ahmedabad). He is further educated at IIM-Calcutta, XLRI-Jamshedpur, Apple Computer Industries and Spar Inc., USA. He has worked for reputed National and International Organizations in Senior/Top Management Capacities at Board level as well as Managing Director and CEO. He is a management expert covering extensive areas from management in industrial sectors, management in agriculture and dairy, development management to management of public systems. He is a prominent professional of India and known Internationally as well. He lives at Mumbai in India.

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