Gold reserves are on the move, but central banks are choosing different vaults
Several central banks, including the Netherlands, France, and India, have been shifting gold reserves out of traditional overseas vaults (New York, London) into domestic or regionally diversified storage.
The Reserve Bank of India (RBI) now holds roughly 77% of its gold reserves domestically, a sharp rise from under half a few years ago.
The trend reflects a broader rethink among central banks on where their "ultimate crisis asset" — gold — should physically sit, driven by geopolitical risk and a desire to reduce dependence on any single custodian jurisdiction.
The remainder of India's gold holdings continues to be kept in safe custody with the Bank of England and the Bank for International Settlements (BIS), along with a small quantity held as gold deposits.
RBI's Gold Reserves and the Legal-Institutional Framework
The RBI holds gold as part of India's foreign exchange reserves under powers granted by the Reserve Bank of India Act, 1934. Gold reserves serve as a store of value and a hedge against currency and geopolitical risk, distinct from foreign currency assets (FCA) which form the largest component of India's reserves.
Key Details
- RBI held about 880.5 metric tonnes of gold as of end-March 2026, of which around 680 tonnes (77%) is stored domestically (Nagpur and Mumbai vaults), per RBI's half-yearly reserves management report.
- The remaining gold is held in safe custody with the Bank of England and the BIS, with a small portion as gold deposits.
- RBI added 168.06 tonnes of gold to domestic vaults in 2025-26 alone, up from 107.21 tonnes in 2023-24 and 103.68 tonnes in 2024-25, reflecting an accelerating repatriation trend since 2024.
- Gold's share in India's total foreign exchange reserves has been rising, moving close to 12% in recent years as RBI diversifies away from dollar-denominated assets.
The move to bring gold home is a continuation of this repatriation trend, and mirrors similar moves by other central banks reassessing counterparty and custodial risk in an era of financial sanctions and geopolitical fragmentation.
The 1991 Gold Pledge — Historical Context
India's own history with sovereign gold offers a cautionary counter-example: during the 1991 Balance of Payments crisis, India had to pledge (not sell) gold with foreign central banks to raise emergency foreign exchange, illustrating why the location and control of a country's gold reserves is a matter of strategic significance.
Key Details
- In May-July 1991, the RBI/Government of India pledged roughly 67 tonnes of gold with the Bank of England, Bank of Japan, and Union Bank of Switzerland to raise around USD 400-600 million in emergency loans.
- These were collateralised loans/repurchase arrangements, not outright sales; the gold was later redeemed as reforms and IMF support stabilised the Balance of Payments.
- This episode is frequently cited in UPSC economy material as the trigger point for India's 1991 economic liberalisation.
The memory of having to pledge gold abroad in a crisis is part of the strategic rationale for central banks — including RBI — now preferring to hold a larger share of gold reserves within their own borders, reducing dependence on foreign custodians during a future crisis.
RBI's Economic Capital Framework and Gold Revaluation
The RBI's surplus transfer to the government is governed by an Economic Capital Framework (ECF), under which gains from gold and currency revaluation are treated as a separate risk buffer rather than distributable income — directly linking gold holdings to RBI's balance sheet management and its annual dividend to the government.
Key Details
- The ECF was formulated based on the Bimal Jalan Committee (constituted November 2018), which reviewed RBI's economic capital adequacy under Section 47 of the RBI Act, 1934.
- The Committee recommended a Contingent Risk Buffer (CRB) of 5.5%-6.5% of RBI's balance sheet and that revaluation balances (including gold revaluation gains) be kept separate from realised equity, not used to cover operational losses.
- The revised ECF was adopted by RBI's Central Board on 26 August 2019 and is reviewed every five years.
Rising global gold prices increase RBI's gold revaluation reserves, which under the ECF cannot be freely distributed as dividend — making the composition and location of gold holdings relevant not just to reserve security but also to RBI's balance-sheet and dividend policy.
- RBI's total gold reserves: ~880.5 metric tonnes (end-March 2026); ~77% held domestically (~680 tonnes).
- Gold added to reserves: 168.06 tonnes in 2025-26, vs. 107.21 tonnes (2023-24) and 103.68 tonnes (2024-25).
- Domestic share of gold reserves has more than doubled from under 50% in 2024 to 77% now.
- 1991 crisis: ~67 tonnes of gold pledged (not sold) with Bank of England, Bank of Japan, and Union Bank of Switzerland for ~USD 400-600 million in emergency funds.
- Bimal Jalan Committee (2018) recommended CRB of 5.5-6.5% of RBI balance sheet; ECF adopted 26 August 2019, reviewed every 5 years.