International Monetary Fund has sold 200 tonnes of gold to the Reserve Bank of India, nearly half the total approved by the IMF executive board in September.
Proceeds from the off-market sale amounted to $6.7 billion , or 4.2 billion of special drawing rights, or SDR, a combination of currencies, the IMF said. Payment is expected to be in major currencies that make up the SDR.
IMF managing director Dominique Strauss-Kahn welcomed the transaction as an important step toward achieving the objectives of the gold sales program, namely "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".
Finance Minister Pranab Mukherjee said RBI's move to buy 200 tonnes of gold from IMF provided a healing touch to the nation's pride that was dented about two decades back when the country sold its gold for a few hundred million dollars.
Mukherjee said one should not read much into the RBI's purchase of gold from IMF, but added it is significant as it reminds of the days when India's sentiments were outraged.
"It has much more significance because for many of you it is not the remote past,... how the sentiments of the country felt outraged when we had to pledge gold to Bank of England just for borrowing few hundred million dollars to maintain our essential import requirement," he said at the Economic Editors' Conference.
The pledging of gold with Bank of England started during the Chandra Shekhar government some two decades back.
When contacted, Yashwant Sinha, Finance Minister in the Chandra Seshaker Cabinet, alleged that the then government had to pledge 20 tonnes of gold, because of "profligacy" by the former Rajiv Gandhi Government and "inaction" by the previous V P Singh government that led to balance of payments problems.
Sinha also claimed that his government pledged 20 tonnes of gold which was smuggled into the country, while the successive Narasimha Rao government pledged 48 tonnes of RBI gold with Bank of England.
Mukherjee added the purchase does not mean that "we don't prefer the dollar any more or like gold any better."
The Finance Minister said his advice to the RBI Governor would be that "if you are in a position keeping in view the availability of the foreign exchange you buy that (gold)."
The Reserve Bank of India (RBI) has bought gold from the IMF for about USD 6.7 billion. The IMF plans to sell over 403 metric tonnes of gold over the coming years.
"We bought it because we have money, we have forex reserves... forex reserves shows confidence of investors in Indian economic resilience... despite global tremor, India and Chinese economies continued to survive," he said.
The International Monetary Fund said it got a "good price," and wants to be similarly "lucky" in the next phase sale of the precious metal.
The sale price of gold to the RBI is expected to be under USD 1,045 per ounce, nearly USD 200 per ounce higher than what it would have been anticipated in mid-September, a senior IMF official told reporters in a teleconference.
When the IMF Executive Board at its meeting on September 18 announced to sell 403.3 tonnes of gold -- one-eighth of the Fund's total holding - the prevailing market price of the bullion at that time was about USD 850 an ounce.
"Obviously, it's a good price relative to the original assumptions," the IMF official said.
The IMF, in pursuance of the decisions taken at the G-20 summit in London, had decided to sell about 403.3 tonnes of gold to shore up its finances so that it can lend money to the poor countries at concessional rates.
"Of course, this is only half the sale that we have completed, so we don't want to get ahead of ourselves. We still have another half to go. I hope we'll still be lucky," he said.
The official said the good price received for its gold from India would certainly help the multilateral lending agency to meet its target of stepping up financing to poor countries. PTI