India’s Gold Reserves Double Share of Forex Holdings to 11.70% by March 2025, RBI Report Shows

India’s gold reserves have risen substantially as a proportion of the country’s foreign exchange holdings over the past four years, reaching 11.70% by March 2025, according to a recent Reserve Bank of India (RBI) report. This marks a notable increase from 5.87% in March 2021, reflecting a strategic shift in reserve composition and an increased emphasis on gold as a component of sovereign assets.

RBI’s Current Gold Holdings and Allocation

The Reserve Bank of India now holds 879.59 metric tonnes of gold, up from 854.73 tonnes reported in September 2024. Around 58% of this stock is stored within the country, while the remainder is kept in international vaults. The allocation between domestic and overseas storage reflects operational, security and credibility considerations in reserve management.

Why Central Banks Increase Gold Holdings

Central banks around the world have been increasing gold positions as part of broader diversification strategies. Gold is commonly viewed as a hedge against inflation and a store of value during periods of currency volatility. For sovereign reserve managers, holding gold can reduce concentration risk in foreign currency assets and provide an alternative to government bonds denominated in major currencies.

Gold’s traditional role as a safe-haven asset makes it attractive when global markets face uncertainty. Unlike liabilities from other nations, gold does not carry issuer credit risk, which is one reason many central banks include it in their foreign exchange and reserves strategy.

Implications for Reserve Diversification and Policy

The rise in gold’s share of India’s foreign exchange holdings signals a deliberate effort to diversify reserve composition. Diversification can help stabilise the value of overall reserves when major currencies fluctuate or when sovereign bond markets experience stress. For policymakers, a larger gold allocation can complement other reserve instruments and contribute to financial stability during external shocks.

While gold holdings are not directly income-generating like interest-bearing foreign securities, they serve an important risk management function. By increasing the proportion of gold in reserves, authorities can balance yield objectives with the need for resilience against inflation, currency depreciation and geopolitical risk.

Operational and Strategic Considerations

Decisions about how much gold to hold and where to store it involve logistical, security and cost considerations. Storing a portion of reserves domestically can improve access and control, while maintaining reserves abroad can provide diversification of custodial risk and easier access to international markets if rapid liquidity is required. The RBI’s mix of domestic and international storage appears to reflect these competing priorities.

Global Context and Future Outlook

The RBI’s move aligns with a broader global trend of central banks expanding gold holdings. As macroeconomic conditions evolve, including inflationary pressures and shifts in currency valuations, central banks may continue to adjust their reserve compositions. For India, maintaining a prudent and diversified reserve portfolio will remain crucial to supporting external stability and confidence in the country’s financial position.

Key Facts at a Glance

• Gold share of India’s foreign exchange holdings: 11.70% as of March 2025 (up from 5.87% in March 2021).
• RBI gold holdings: 879.59 metric tonnes (increase from 854.73 tonnes in September 2024).
• Storage split: approximately 58% domestically stored, remainder held internationally.
• Reasoning: diversification of reserves, hedge against inflation and currency volatility, and alignment with global central bank trends.

The RBI report highlights a deliberate shift toward greater use of gold within India’s reserve strategy. While gold does not replace the role of foreign currency assets or sovereign bonds, its growing share reflects a cautious approach to reserve risk management amid an evolving global macroeconomic landscape.