Why RBI is buying gold heavily, know the main reasons behind it

India’s central bank has been buying gold continuously for the last four years.

India’s central bank has been buying gold continuously for the last four years. This shows that India is very serious about diversifying the assets present in the country’s foreign exchange reserves. Buying gold from the Reserve Bank of India (RBI) is not a new trend.

central bank of india (Central Bank) He has been buying gold continuously for the last four years. This shows that India’s foreign exchange (Foreign Exchange) It is very serious about diversifying the assets in the reserve. reserve Bank of India (RBI) gold of (Gold) Buying is not a new trend. The central bank has bought gold in small quantities over the years. During the year, the central bank has added 65.11 tonnes of gold to its reserves. This is the highest purchase in a financial year. This is the second highest level after 200 tonnes of gold purchased from the International Monetary Fund (IMF) in the financial year 2009-10.

There are some reasons behind the central bank buying gold. It should be noted that RBI is not alone in buying gold. Data from the IMF shows that central banks across the world have been buying gold for the past few years.

diversify assets

One of the main reasons RBI buys gold is to diversify the assets where foreign exchange reserves are kept. Diversifying forex assets has become popular after Russia’s invasion of Ukraine.

NATO countries decided to limit Russia’s central bank’s use of its forex assets. Given that Russia’s central bank accounts for a large proportion of dollar assets, sanctions on the country have had a major impact on its ability to use its reserves.

protection against uncertainty

After the 2008 financial crisis, questions were raised about the dominance of the dollar. Although the dollar has been the main currency in both cross border trade and investment, the idea of ​​an alternative currency has been repeatedly proposed.

Since the start of the Russia-Ukraine war, central banks, especially those from Asian countries, are focusing on reducing the dollar’s share in reserves. Chinese currency has been a popular choice as an alternative.

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