880 tons and count: Why RBI continues to buy gold despite India being the seventh largest reserve

Today is Akshaya Tritiya, a day traditionally seen as buying gold. But besides personal purchases, gold is becoming increasingly important in global economic strategies, especially among central banks seeking stability during uncertain times.Gold prices have soared to record highs amid the global economic shock, from the common 19th pandemic and the Russian-Ukrainian war to the rise in Japanese political tensions and U.S. trade conflict. In response, central banks around the world have strengthened their gold, viewing yellow metals as a shelter asset.

India’s growing gold reserves

The Reserve Bank of India (RBI) has significantly increased its gold acquisition efforts. In fiscal year 2024-25 alone, it purchased 57.5 tons, making it the second highest annual purchase since 2017. Over the past five years, RBI gold holdings have increased by 35%, from 653 tons in March 2025 to 653 tons in March 2025.
India also climbed the global gold ranking – now ranked seventh in the world in terms of gold reserves, up from the tenth reserve in 2015. Gold now accounts for 11.35% of India’s total foreign exchange reserves, up from 6.86% in 2021.

Why does RBI buy more gold?

Experts point out one main reason: US dollar fluctuations.

“The dollar has been volatile in recent years and gold provides a more stable hedge. While the dollar remains the main reserve for global reserves, the volatility of its value and the peak of U.S. Treasury yields increase the risk of central banks holding large Dollar Reserves. As a result, many are rebalancing their portfolios with gold. “As the dollar index fell from nearly 110 in January 2025 to now beneath the age of 100, the Reserve Bank of India’s share is cautious.

Since September 2022, the Reserve Bank of India has repatriated 214 tons of gold to India, reflecting a strategic shift to domestic storage amid global instability.

“This move strengthens India’s foreign exchange base and reflects a global shift to gold as a stable asset,” said Sachchidanand Shukla, chief economist at L&T Group.

Growing gold reserves could also support India’s efforts to promote rupee in global trade and expand platforms such as international settlements such as UPI.

“As crude oil prices fall and dependence on the dollar decreases, India will benefit from higher trade volumes and greater dividends from the RBI,” Srivastava added.

As gold prices are expected to remain strong, analysts believe central banks, including the Reserve Bank of India, will continue to increase their gold allocations, thereby enhancing long-term financial stability.