Finance Minister Nirmala Sitharaman addressed concerns in the Lok Sabha on Monday, clarifying that India’s growing gold reserves, including those held by the Reserve Bank of India (RBI), are not intended to replace any international currency, particularly the US dollar.
Her remarks came in response to Congress MP Manish Tiwari’s query regarding the global trend of central banks increasing their gold holdings and whether this shift indicates a move away from the US dollar as the dominant currency for international settlements.
Sitharaman explained, “Gold is also kept in the Reserve Bank, and the RBI is purchasing gold. But beyond that, there is not much for me to comment at this stage regarding its role as an international currency or potential replacement.”
Tiwari had pointed out that since the US moved away from the gold standard in 1971, gold had lost its role as a major financial asset. However, he noted that central banks worldwide have recently increased their gold holdings—from just 6% of global reserves in 2006 to about 11% in 2024. Countries like China, India, Poland, and Turkey have been among the most aggressive buyers, driving up domestic gold prices in India as well.
Tiwari asked if this global shift toward gold indicated a search for an alternative to the dollar as a settlement mechanism.
In her response, Sitharaman acknowledged that gold remains a popular investment in India, particularly among households, small businesses, and women. She attributed this to the traditional preference for gold as a secure and liquid asset. “It is very typical of India, particularly for households, small businesses, and women, to invest in gold because they consider it more secure and liquid,” she said.
The Finance Minister also confirmed that the RBI’s gold purchases are part of a strategy to maintain a diversified and balanced reserve portfolio. While the US dollar remains a dominant component of India’s foreign exchange reserves, she emphasized that the RBI also holds reserves in other currencies and gold.
Sitharaman reassured the House that India’s increased gold reserves are not a move away from the US dollar or an attempt to create an alternative international settlement mechanism. The clarification comes amid global discussions around de-dollarization, with some countries exploring alternatives for trade and reserve holdings.
However, Sitharaman made it clear that India’s gold accumulation is a strategy to diversify reserves, not to challenge the dollar’s role in international finance.
