In a significant move but quiet move, the Reserve Bank of India (RBI) has purchased 200 tonnes of gold valued at around $6.7 billion (around Rs 31,500 crore) from the International Monetary Fund (IMF) under the IMF's limited gold sales programme.

“This was done as part of the Reserve Bank’s foreign exchange reserves management operations. The purchase was an official sector off-market transaction and was executed over a two week period during October 19-30, 2009 at market based prices,” the RBI said.

The RBI was holding about 357 tonnes of gold forming about 3.8 per cent of the total foreign exchange reserves in value terms as on March 31, 2009. Of these, 65 tonnes are being held abroad since 1991 in deposits or safe custody with the Bank of England and the BIS. As on October 23, 2009, India’s forex reserves amounted to $ 285.52 billion, indicating a rise of $ 33.5 billion since March 2009. According to the RBI, the foreign currency assets are invested in multi-currency, multi-asset portfolios as per the existing norms which are similar to the best international practices followed in this regard. As at end-March 2009, out of the total foreign currency assets of $241.4 billion, US$ 134.8 billion was invested in securities, US $ 101.9 billion was deposited with other central banks, BIS and the IMF and US$ 4.7 billion was in the form of deposits with foreign commercial banks and funds placed with the External Asset Managers (EAMs).

Said Ajay Mitra, managing director, World Gold Council (India), “We have seen other central banks also doing this type of mass buying gold in the past. I feel that purchasing such huge volume of gold may be to balance the RBI portfolio. I foresee that it could be a big signal of investment move made by the RBI via gold assets. The RBI has always a habit of balancing the risk in currency reserves, especially in dollar terms to safeguard its portfolio.”

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