RBI Buys 200 MT Gold from IMF

Lalit K Jha/Washington
RBI Buys 200 MT Gold from IMF
The Reserve Bank of India's gold stock has shot up by more than 55 per cent with the purchase of 200 tonnes of IMF gold at an estimated cost of USD 6.7 billion.

RBI, which pledged gold during 1991 crisis with the Bank of England to raise resources to meet external obligations, today said it has purchased 200 tonnes of gold from International Monetary Fund (IMF) for USD 6.7 billion.

"The Reserve Bank has decided to buy some gold...About 200 tonnes. That's normally we do (from) time to time. IMF is selling gold so we wanted to buy it," Finance Minister Pranab Mukherjee said in New Delhi.

When asked whether it was a reflection of the growing economic strength of the nation, Mukherjee quipped, "the conclusion is yours."

RBI has purchased almost half the gold which the IMF plans to sell to raise resources to augment its operations and provide concessional loans to poor countries.

"The purchase was an official sector off-market transaction and was executed over a two week period during October 19-30, 2009 at market based prices," RBI said in a release.

The decision to purchase gold will raise RBI's stock of the precious metal from 357 tonnes to 557 tonnes, representing an increase of over 55 per cent.

Of the RBI's current gold stock of 357 tonnes valued at around USD 9.6 billion, 65 tonnes are being held abroad since 1991 in deposits with the Bank of England and Bank for International Settlement (BIS).

Besides taking other steps to tide over the balance of payment crisis in 1991, RBI had pledged gold with the Bank of England to raise funds.

India's foreign exchange reserves, in the aftermath of the Gulf crisis, dipped to USD 5.8 billion tonnes as on March 31, 1991.

The forex reserves, however, started picking up with the onset of the liberalisation policies and peaked to USD 314.61 billion at the end of May 2008.

The high level of foreign exchange reserves, which stood at USD 280 billion as on September 25, 2009, prompted the central bank to increase its stock of gold by purchasing that from the IMF.

The IMF, in pursuance of the decisions taken at the G-20 summit in London, had decided to sell about 403.3 metric tonnes of gold to shore up its finances so that it can lend money to the poorest countries at concessional rates.

"This transaction is an important step toward achieving the objectives of the IMF's limited gold sales programme, which are to help put the Fund's finances on a sound long-term footing and enable us to step up much-needed concessional lending to the poorest countries," IMF Managing Director Dominique Strauss-Kahn said in a statement.

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