RBI Accelerates Gold Repatriation: A Strategic Shift in Forex Reserves

Key Takeaways

• RBI nearly doubles the proportion of its gold reserves stored domestically to over 65% by the end of September 2025.
• Repatriation of nearly 64 tonnes of gold to India in the first six months of fiscal year 2025.
• Strategic shift attributed to concerns over the freezing of foreign assets, similar to actions taken against Russia in 2022.
• Increasing share of gold in India's total forex reserves, with plans to further increase it to 20%.
• Aligns with a global trend of central banks increasing gold holdings amid challenges to the dollar system and geopolitical risks.

RBI Localizes Gold Reserves

The Reserve Bank of India's (RBI) recent half-yearly report reveals a significant shift in its gold reserve management. The central bank is now focusing on repatriating substantial amounts of the precious metal back to India, marking a notable departure from previous storage practices. By the end of September 2025, the RBI had stored over 65% of its gold reserves within the country. This figure represents a substantial increase from the approximately 38% recorded in September 2022. In the first half of fiscal year 2025 alone, the central bank repatriated nearly 64 tonnes of gold to India. Currently, the RBI's total gold reserves stand at 880 tonnes, with 576 tonnes held domestically. Historically, the RBI has kept a significant portion of its gold holdings abroad, often entrusting them to the Bank of England and the Bank for International Settlements (BIS).

Reasons Behind the Shift

While the RBI has not explicitly stated the reason for the move, analysts widely believe it is motivated by the fallout from the freezing of Russian assets in 2022. Following the Russia-Ukraine conflict, the G7 and the European Union froze approximately $280 billion of Russian assets held abroad, including $75 billion in gold reserves. These actions, lacking a clear international legal basis, raised concerns about the safety of foreign assets held by sovereign nations. Therefore, by repatriating gold, the RBI seeks to exert greater direct control over its national gold assets and mitigate potential risks.

Hedging Against Global Uncertainty

In an interview with The Economic Times, Ritesh Jain, founder of Pinetree Macro, urged the RBI to accelerate the pace of gold repatriation, describing the current situation as a world where international law is disregarded and foreign exchange reserves are seized. He emphasized that if gold is not in your physical possession, it is not truly yours.

Gold and De-Dollarization

The RBI's focus on localizing its gold reserves aligns with its broader efforts to diversify its foreign exchange reserves away from the US dollar. India, one of the world's largest gold consumers, has been steadily increasing its gold holdings since 2018, adding 279.54 tonnes to its reserves. Concurrently, the RBI has been gradually reducing its holdings of US Treasury bonds, a trend that began even before the Trump administration imposed a 50% tariff on India for purchasing Russian oil. As of the end of September 2025, gold constituted 13.92% of India's total foreign exchange reserves, up from 11.70% at the end of March 2025. The RBI aims to increase this proportion to 20% in the future.

A Global Trend

India's approach is not unique. According to the World Gold Council, global central banks' net gold purchases totaled 415 tonnes in the first half of 2025, close to record levels. Central banks in China, Russia, Turkey, and other emerging market countries are increasing their gold holdings. The vast majority of central banks surveyed expect global official gold reserves to continue growing over the next 12 months. This growing trend reflects the increasing role of gold as a safe-haven asset and store of value amid challenges to the dollar system and geopolitical risks. As of October 17, 2025, India's total foreign exchange reserves stood at $702.3 billion, the fourth largest in the world. This provides India with a significant cushion to implement its diversification strategy.

Implications

By increasing its gold holdings and accelerating the pace of domestic storage, India is taking proactive steps to diversify its reserves and reduce its reliance on the US dollar. This strategy could have significant implications for the global economy, potentially leading other emerging market countries to re-evaluate their reserve management strategies.