Rupee Convertibility

Ekansh Charangoo (124) MBA 2B

Balance of Payments
BOT : Import and Export of visible goods BOI : Transaction on Import and Export of services Balance on current A/C Capital A/C Transaction : Deposits, Foreign Investments, Borrowings and Lending

Meaning of Convertibility
Ease of converting local currency into foreign currency No interface of RBI or GoI on forex transactions or any approval from them Residents to have freedom of investment, borrowing from domestic/ Int. markets Accepting foreign currency as a medium of transaction in home country

Meaning of Convertibility
Freedom to residents for maintaining foreign currency A/C in the home country Convertibility is all about colour & nationality of currencies loosing significance

Status of Convertibility in India

India has current a/c convertibility on its BOP with following 4 restrictions: Outward remittances to prize money on racing, betting, lottery is not permitted Outward tourism : upto $ 10,000 Health and Education : upto $ 100,000 P.A. Payments to Indian/Foreign artist in foreign currency requires approval of Min. of Finance

Capital A/C Convertibility

India doesn t have convertibility on capital a/c. Some Relaxations: Outflows of NRI deposits, FDI, FII are unrestricted Indian corporates are allowed to borrow upto $ 500 million under automatic route of RBI Indian residents can now remit upto $ 200,000 freely for any overseas investments Fuller convertibility

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