CONVERTIBILITY OF RUPEE

CONVERTIBILITY

Convertibility of currency means the extent to which a countrys regulations allow free flow of money into and outside the country. Full convertibility of rupee means that the rupee would be made freely exchangeable into other currencies and vice versa.

CURRENT ACCOUNT

It is one of the two primary components of the balance of payments. It is the sum of balance of trade net factor income net transfer payments.

CURRENT ACCOUNT CONVERTIBILITY

As of now, India has current account convertibility.

This allows residents to receive and make payments in foreign currency for all purposes other than investments and loans. It also allows trade-related payments and receipts by importers and exporters in dollars and any other foreign currency.

CAPITAL ACCOUNT

The capital account in a countrys balance of payments covers a variety of financial flows mainly foreign direct investment (FDI), portfolio flows (including investment in equities), and bank borrowing which have in common the acquisition of assets in one country by residents of another.

CAPITAL ACCOUNT CONVERTIBILITY (CAC)

An economy is said to have CAC when there is complete freedom to convert local currency into foreign currency and vice versa - without the permission of the RBI, and without limits. It consists of foreign direct investment (both by foreigners in India and by Indians abroad), investment in financial securities (both ways), giving and receiving of foreign loans and shortterm investments by foreigners in India and vice-versa.

RESTRICTIONS ON CONVERTIBILITY OF RUPEE

As of now there are limits to the amount of foreign exchange one can take abroad depending on the purpose at hand. he can do that up to $25,000 annually.

If an individual wants to invest in stock markets abroad, For a person wanting to go abroad for a holiday, the current limits are $10,000 per calendar year. NRIs and persons of Indian origin can, as of now, repatriate up to $10 million a year from their nonresident rupee accounts.

The current limit for business travel, stands at $25,000.