New Delhi: The Reserve Bank of India (RBI) has sold gold worth $1.15 billion so far in its business year (July-June), along with buying gold worth $5.1 billion. The pace of gold sale in the current banking year has been quicker than the previous full year, when gold sales totalled just over $2 billion.
Experts are of the view that the move was forced by RBI’s recent decision to transfer Rs 1.76 lakh crore to the government as per the Bimal Jalan committee’s recommendations.
As Friday, the value of gold in the country’s forex reserves amounted to $26.8 billion. In August, the central bank also accepted the Bimal Jalan committee report on its capital framework. In a very controversial advisory, the committee recommended that after providing for various risk buffers, the entire surplus could be transferred to the government.
Analysts said that the central bank has actively started trading in gold post the adoption of the report. Ajay Kedia of Kedia Advisory said that as the RBI is in surplus of gold, it gives space to the apex bank to sell the yellow metal.
The total amount of gold with the RBI at the end of August was 19.87 million troy ounces, according to the latest data. National Secretary at India Bullion and Jewellers Association, Surendra Mehta, said the recent sale of gold by the RBI is not very significant to cause ripples in the bullion market.
Globally, central banks have been diversifying foreign exchange reserves and have some portion of the reserves in the form of gold. Market analysts also believe that the recent trading and sale of gold is part of the RBI’s treasury activity.
Data from the RBI shows that in the last banking year (July-June, 2018-19) the central bank had sold gold worth over $2 billion in six out of the 12 months. This means the rate of sale has increased in the current banking year as $1.15 billion worth of gold has already been sold in a period of around four months.
In 1991, the RBI had to pledge 67 tonnes of gold to Union Bank of Switzerland and Bank of England to get secured from a balance of payments crisis when the country had barely enough reserves to fund a few weeks of imports.