CONVERTIBILITY OF RUPEE

CONVERTIBILITY   Convertibility of currency means the extent to which a country’s 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.

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

CURRENT ACCOUNT CONVERTIBILITY  As of now. It also allows trade-related payments and receipts by importers and exporters — in dollars and any other foreign currency.   . This allows residents to receive and make payments in foreign currency for all purposes other than investments and loans. India has current account convertibility.

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

investment in financial securities (both ways). giving and receiving of foreign loans and shortterm investments by foreigners in India and vice-versa. and without limits. .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. It consists of foreign direct investment (both by foreigners in India and by Indians abroad).

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. repatriate up to $10 million a year from their nonresident rupee accounts.    The current limit for business travel. For a person wanting to go abroad for a holiday. .000 per calendar year. stands at $25. the current limits are $10.000.000 annually.  If an individual wants to invest in stock markets abroad. he can do that up to $25. as of now. NRIs and persons of Indian origin can.

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