In a significant address at an international conference in Mumbai, RBI Deputy Governor Shishir Chandra Murmu explored the critical implications of soaring gold prices and the potential of Central Bank Digital Currency (CBDC) on the financial viability of central bank operations. This discourse reveals how these two facets pose both challenges and opportunities for central banks globally, and particularly for the Reserve Bank of India (RBI).
The Unprecedented Surge in Gold Prices
The price of gold has experienced a remarkable compound annual growth rate (CAGR) of 12.5% over the past two decades, more than tripling in value over the last five to six years. This dramatic increase has alerted central banks around the world as they reassess their gold valuation practices amid rising financial pressures. The RBI, for instance, adheres to a conservative approach by revaluing its gold holdings at just 90% of the London Bullion Market Association (LBMA) prices, a practice that varies widely across countries.
“The RBI conservatively revalues the gold holdings at 90% of the LBMA gold price. However, gold revaluation practices vary across countries and the impact of high movement in gold prices on central bank balance sheets and income needs wider discussion,” remarked Murmu during his keynote. As of September 2025, the RBI holds an impressive 880.8 tonnes of gold reserves, reflecting India’s growing prominence in the global economy alongside its total reserves surpassing $100 billion.
The Shift Towards Accelerated Gold Repatriation
In recent months, the RBI has considerably increased the repatriation of gold, nearly bringing home 64 tonnes between March and September 2025. This strategic move was largely influenced by geopolitical uncertainties, including conflicts such as the Russia-Ukraine war, prompting experts to advocate for a more rapid repatriation process. Ritesh Jain, founder of Pinetree Macro, stated, “We are of the view that India’s central bank should accelerate the repatriation of gold simply because we live in a geopolitically fragmented world where rule of law was broken.”
The growing share of gold, now 13.9% of total reserves, indicates a rising trend where central banks globally are increasing their investments in gold, purchasing over 1,000 tonnes annually. This adaptation underscores a collective shift in thinking towards gold as a more stable reserve asset in times of international turbulence.
CBDC: Navigating New Frontiers in Central Banking
The potential of CBDC as a transformative tool for central banks is becoming a central point of discussion. Murmu highlighted ongoing research into how the design choices of CBDCs could influence public adoption, potentially substituting traditional banknotes or deposits. “Some research papers have tried to explore how the design choices for CBDCs adopted by central banks may shape people’s behaviour with respect to adoption of CBDC and potential substitution of banknotes and/or bank deposits with CBDC,” Murmu noted.
Given the rapid evolution of digital currencies, central banks worldwide are engaging in dialogues regarding CBDC’s effect on balance sheet structures and liquidity operations. “It is also being discussed and debated globally whether and how this may impact central bank balance sheet structures and the need for liquidity operations,” asserted Murmu. This consensus reflects a pressing need for collaboration among central banks to share experiences and insights in this emerging area.
The RBI’s Resilient Accounting Framework
The RBI’s accounting policies have been built on a foundation of prudence and transparency since the RBI Act of 1934. With a strong balance sheet supported by adequate risk provisioning, the RBI stands as a model for demonstrating resilience in fiscal management. Murmu emphasized the commitment of the RBI to adapt its accounting practices in response to changing global dynamics while adhering to core principles. “Over the years, RBI has consistently worked to align its accounting practices with global best practices, while staying true to core principles of prudence and conservatism,” he stated.
This focus on evolving yet conservative accounting principles is vital, particularly in the face of emerging challenges posed by fluctuating asset values and digital currencies. The RBI’s strategy reflects an understanding that effective financial management is paramount for maintaining stability and confidence in the economy.
Charting a Course for the Future
The discussion initiated by Deputy Governor Murmu at the Mumbai conference underscores the critical intersections between rising gold prices and the transformative potential of CBDC. As central banks, including the RBI, navigate these uncharted waters, it is clear that adaptation, international collaboration, and prudent management will be essential in cushioning against financial volatility. The proactive measures taken today will determine the resilience of central banking in the future, encouraging stakeholders to closely monitor evolving trends and adapt accordingly.
