Gold Saves India from Brink of Crisis

India's economy teetered on the edge of crisis in July 1991, but gold helped pull it back. The country's foreign exchange reserves had plummeted to levels that could only cover a few weeks of imports, and international lenders were losing confidence.

The RBI decided to pledge its gold reserves as collateral to raise emergency funding. In two transactions, India mobilized nearly 67 tonnes of gold, generating around $600 million in foreign currency loans. The first transaction involved the State Bank of India and Union Bank of Switzerland, while the second involved the Reserve Bank of India's own gold stock pledged to the Bank of England and the Bank of Japan.

The secrecy surrounding the operation was intense, with officials going to great lengths to avoid publicity. The gold was transported under heavy security from RBI vaults in Mumbai to the airport, where it was flown overseas in multiple tranches.

The gold transactions bought India precious time, allowing policymakers to launch sweeping economic reforms. The rupee was devalued, industrial licensing was dismantled, and trade barriers were reduced. Today, the RBI holds 880.52 tonnes of gold, more than double the level that existed around the time of the 1991 crisis.