RBI adds 25 tonne gold to its reserves in second half of FY25

The Reserve Bank of India (RBI) has augmented its gold reserves by 25 tonnes in the second half of the financial year 2025, according to official data released on Monday. This addition comes during a period of significant price escalation in gold, which saw a 30% surge. By the end of March 2025, the RBI's total gold holdings reached 879.59 tonnes, up from 854.73 tonnes at the close of September 2024. This increase forms part of the largest annual gold acquisition over the past seven years, with over 57 tonnes added throughout FY25.

The proportion of gold within the RBI's total foreign exchange reserves rose to 11.70% at the end of March, compared to 9.32% six months earlier. However, the overall foreign exchange reserves decreased to $668.33 billion from $705.78 billion in September 2024. This reduction affects the import coverage capacity of the reserves, which can now support 10.5 months of imports as opposed to the previous 11.8 months.

A significant portion of the RBI's gold reserves is stored domestically, with quantities increasing slightly to 511.99 tonnes. Additionally, 348.62 tonnes are secured with the Bank of England and the Bank for International Settlements, while 18.98 tonnes are maintained as gold deposits. The shift of gold to local storage in the fiscal year marks one of India's most substantial movements of gold since 1991, prompted by heightened global geopolitical tensions.

In context, the RBI's strategy appears to align with global trends where central banks are opting to boost gold reserves as a hedge against currency volatility and geopolitical risks. Despite the decrease in overall reserves, the increase in gold holdings may provide a stabilising asset amidst fluctuating market conditions. This approach by the RBI reflects a cautious reinforcement of financial stability, balancing gold accumulation with the declining forex reserve scenario.