Did RBI sell $12 billion worth of gold to protect India’s forex reserves? – Firstpost

A Bloomberg Economics analysis has suggested that the Reserve Bank of India (RBI) may have reduced part of its gold holdings in May to strengthen India’s foreign-currency reserves as economic pressures continue to mount from the Iran-US conflict and the disruption of global energy supplies.

The claim has since been disputed by the Indian government, which has described reports of RBI selling gold to protect foreign exchange reserves as fake.

What did the analysis claim?

According to the assessment by Bloomberg, movements in India’s reserve figures during the two weeks ending May 22 appeared to indicate that the central bank may have reduced its gold holdings while simultaneously increasing its stockpile of foreign-currency assets.

The analysis estimated that the RBI could have sold gold worth approximately $12 billion during the period while adding around $7.5 billion in foreign-currency reserves.

The analysis argued that the movement was unusual because the government had recently increased import duties on gold.

Under normal market conditions, such a move, along with prevailing prices of the precious metal, would have been expected to increase the reported value of the RBI’s bullion holdings. Instead, the value appeared to decline during the period under examination.

The report argued that this divergence suggested that the central bank may have sold a portion of its gold reserves. The analysis did not cite any official RBI confirmation. Rather, it relied on publicly available reserve data and an interpretation of the changes recorded during the period.

How has the RBI reacted?

The RBI responded by stated that reports suggesting that the RBI sold gold to protect foreign exchange reserves were incorrect.

“The Reserve Bank of India (RBI) has come across reports in certain sections of the media about RBI’s sale of gold. The RBI emphasises that these reports are not correct,” said the press release as seen by Firstpost on Wednesday.

It added that “the physical stock of gold remains unchanged at 880.52 tonnes as on date.”

The Press Information Bureau (PIB), in a fact-check, has also responded to the Bloomberg report stating that “this claim is FAKE.”

It added that, “According to the RBI, the share of gold in India’s foreign exchange reserves rose from 13.92 per cent at end-September 2025 to 16.70 per cent on March 31, 2026, and further to 16.85 per cent as of May 22, 2026.”

A news report published by @Bloomberg states that RBI may have sold gold amounting to approximately USD 12 billion.#PIBFactCheck

❌ This claim is FAKE

✔️ According to @RBI, the share of gold in India’s foreign exchange reserves rose from 13.92% at end-September 2025 to 16.70%… pic.twitter.com/eVjxPxEv1i

— PIB Fact Check (@PIBFactCheck) June 3, 2026

Following publication of the analysis, the Congress party criticised the government over the alleged sale of gold reserves, turning what began as a discussion about reserve data into a broader political controversy.

However, despite the noise, no official statement from the RBI has confirmed that any gold sale took place.

How much gold reserves does India have?

According to the RBI’s half-yearly foreign exchange report released in April, India held 880.52 metric tonnes of gold at the end of March.

A notable trend in recent years has been the growing share of gold stored within India.

By March 2026, approximately 77 per cent of the RBI’s gold reserves were held domestically. Six months earlier, the proportion stood at 66 per cent.

The shift reflects a broader trend among emerging-market central banks toward increasing domestic custody of reserve assets. The RBI stated that a large portion of its overseas gold remains held with institutions including the Bank of England and the Bank for International Settlements.

Analysts have linked the repatriation trend to concerns that emerged after Russian assets were frozen by Western countries following the outbreak of
the Russia-Ukraine conflict.

Those actions prompted several countries to reassess where reserve assets are stored and how easily they could be accessed during periods of geopolitical tension.

The increase in domestic gold holdings indicates that India has also been adapting its reserve-management strategy in response to these developments.

Why is reserve management a concern particularly now?

As the world’s third-largest importer of crude oil, India remains heavily dependent on overseas energy supplies. The country imports the vast majority of its oil requirements, making it especially vulnerable to sudden increases in global crude prices.

The conflict in West Asia and the effective closure of the Strait of Hormuz have created concerns about the reliability of energy supplies and pushed oil prices higher.

The resulting increase in India’s import bill has escalated demand for foreign currency, particularly US dollars, which are required to pay for energy imports.

This has created additional strain on India’s external accounts and contributed to weakness in the rupee.

According to the analysis, policymakers have become increasingly concerned about the combination of sustained foreign capital outflows, elevated energy costs and the pressure these factors are exerting on India’s balance of payments.

The report suggested that if gold sales did occur, they would reflect a preference for holding larger amounts of liquid foreign-currency assets at a time when external financing conditions have become more challenging.

The analysis also argued that the central bank may be prioritising readily deployable foreign-currency reserves as India confronts a wider current-account deficit.

How serious is the pressure on the rupee?

The Indian rupee has experienced a difficult year, weighed down by rising oil prices, uncertainty surrounding the West Asian conflict and persistent foreign capital outflows. According to reports, the Indian currency fell to a record low of 96.96 against the US dollar in mid-May.

The currency has declined by nearly 9 per cent during 2026, making it one of Asia’s weakest-performing currencies this year. Although the rupee has since recovered from its lowest levels, pressure remains substantial.

Currency traders indicated that the rupee’s losses would likely have been larger had the RBI not intervened repeatedly in foreign exchange markets.

According to traders cited by Reuters, intervention efforts have become a near-daily occurrence since the currency reached record lows in May. State-owned banks were reportedly observed selling dollars near the 95.50 level on Wednesday, activity traders attributed to RBI intervention.

These operations are designed to slow excessive currency depreciation and prevent disorderly market conditions.

How is RBI responding to the crisis?

Reports indicate that RBI Governor Sanjay Malhotra is
considering multiple policy options to stabilise the currency and reassure markets. Among the measures reportedly under consideration are an increase in interest rates and initiatives aimed at attracting additional dollar inflows from overseas investors.

At the same time, the central bank has continued to use its foreign exchange reserves to smooth volatility in currency markets. Reuters reported that RBI interventions have included both direct dollar sales and dollar-rupee buy/sell swaps.

These swaps allow the central bank to manage liquidity conditions while mitigating the effect of intervention on reserve levels.

The impact of these operations has also been visible in derivatives markets. Reuters also noted that dollar-rupee forward premiums declined as a consequence of such swaps, with the one-year implied yield falling by 12 basis points to 3.03 per cent.

Forward premiums represent the cost investors incur when seeking protection against future rupee depreciation.

What are economists expecting from the RBI?

Many economists believe the central bank faces a policy dilemma. On one hand, higher energy prices could push inflation upward, potentially arguing for tighter monetary policy.

On the other hand, slowing growth and weaker economic activity could favour maintaining supportive financial conditions.

Economists at JP Morgan expect the RBI to leave its benchmark policy rate unchanged at 5.25 per cent during its upcoming monetary policy meeting.

The firm said, Given the recent weakness in the currency, the RBI is likely to reiterate the “separability” principle under the inflation-targeting regime: Policy rates are used to manage growth-inflation dynamics, while FX volatility is addressed through FX reserves and other regulatory measures.”

The assessment suggests that the central bank may continue to treat currency management and monetary policy as distinct challenges requiring different tools.

Bloomberg Economics also argued that opportunities to rebuild reserves may emerge if conditions improve.

How is the govt stepping up to manage the pressure?

Alongside RBI actions, the government
has introduced measures aimed at reducing the impact of external shocks on the economy. According to the reports, authorities have sought to limit foreign-currency outflows and cushion the economy from the effects of the conflict.

Among the measures already implemented are
increases in fuel prices and a more than twofold increase in import duties on precious metals. Officials are also expected to consider additional steps designed to support the rupee and strengthen external-sector stability.

Even as external-sector challenges escalate, recent fiscal data suggest that the government’s budget position remains largely aligned with official projections.

Data released this week showed that India’s fiscal deficit for the financial year ending March 31, 2026, stood at 4.4 per cent of gross domestic product.

The figure matched the government’s revised estimate.

The fiscal deficit amounted to Rs 15.19 trillion, equivalent to 97.5 per cent of the revised target announced in February.

Data also showed that in April, the fiscal deficit had reached 21.4 per cent of the budgeted target for the financial year ending March 2027.

Government revenues recorded growth during the year. Net tax receipts rose to Rs 33 trillion from Rs 30.87 trillion a year earlier. Non-tax revenue increased to Rs 6.8 trillion from Rs 5.31 trillion.

Total expenditure reached Rs 49 trillion compared with Rs 47.16 trillion during the previous year.

Capital expenditure, which includes investment in infrastructure and physical assets, increased to Rs 10.7 trillion from Rs 10.18 trillion.

With inputs from agencies