RBI indulges in gold sale to plug revenue shortfall for the first time in thirty years


 There have been surprises galore in the Indian government and politics since Narendra Singh Modi and his party Bharatiya Janata Party took over. As per sources, RBI has already sold 1.15 billion dollars upon the recommendations of the Bimal Jalan-led committee. It has also invested in gold worth 5.1 billion dollars since July.

According to the committee headed by Bimal Jalan, RBI should involve in sharing profits with the government from trading in metals and not disclose the profits in gold valuation with the government. This Jalan committee was created this year to look for ways how the government can lessen the revenue shortfall. Coincidentally, the committee also suggested a transfer of the surplus profits to the Centre which led to a transfer of 1.76 lakh rupees to the current government.

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Though there has been some strong criticism about the action from the opposition, RBI has issued a statement that it has not indulged into any sort of trading of gold. The RBI defended the incident stating, “The fluctuation in value depicted in Weekly Statistical Supplement is due to change in frequency of revaluation from monthly to weekly basis and is based on international prices of gold and exchange rates.”

According to the sources, the Central Bank admittedly approved of the Bimal-led  committee report which recommended the transfer of RBI’s surplus to the government. The financial analysts reported that the central bank has actively started trading in the gold post the adoption of the report. Ajay Kedia from Kedia Advisory said that as the RBI is in surplus of gold, it gives space to the apex bank to sell the yellow metal.

Globally, central banks have been diversifying foreign exchange reserves and have some portion of the reserves in the form of gold. Many such analysts also believe that the recent trading and sale of gold is part of the RBI’s treasury activity.

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The financial analysts said that the stock of gold in Forex reserves has traditionally been revalued only once a month. Any alterations in the interim weeks could be accounted to the purchase or trading of gold. But some former central bank officials didn’t rule out the possibility that RBI had changed the gold value reporting format. RBI hadn’t responded to ET’s queries on Friday. It doesn’t disclose the volume of gold in its vaults at ra egular frequency. RBI may also be trading in gold as part of treasury operations, the way it trades in currencies, they said.

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