RBI Gold Acquisition
- May 13, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
RBI Gold Acquisition
Subject: Economy
Section: External Sector
Context:
India’s gold holdings have gone up to 760.42 tonnes, with the Reserve Bank of India (RBI) adding another 16.58 tonnes of the yellow metal to the country’s foreign exchange kitty during the six months ended March 2022.
Details:
RBI’s gold acquisition happened at a time when foreign portfolio investors (FPIs) were exiting India and forex reserves declined by $44.73 billion from $642.45 billion in September 2021 to $597.72 billion on April 29, 2022, as per Reserve Bank data.
In value terms (USD), the share of gold in the total foreign exchange — or forex — reserves increased from about 5.88 per cent as at end-September 2021 to about 7.01 per cent as at end-March 2022 making India the ninth-largest holder of gold reserves.
Why?
- While gold no longer plays a direct role in the international monetary system, central banks and governments still hold extensive gold reserves to preserve national wealth and protect against economic instability.
- Reserve asset-Gold is the third largest reserve asset globally, following US dollar- and euro-denominated assets.
- Collateral in financial transactions, much like other high-quality, liquid assets like government debt.
- Stability and diversity to the forex reserves at a time when capital outflows fluctuating.
Central bank balance sheet
|