BANKING AFFAIRS

Detailed explanation-1: -Buying currency of different nations takes place through RBI or any branch of a bank which is authorized for such business. Therefore, if a customer wishes to purchase some US dollars in India, he should go to RBI or any branch of a bank which is authorized for such business.

Detailed explanation-2: -Who are authorized by the Reserve Bank to sell foreign exchange for travel purposes? Ans. Foreign exchange can be purchased from any authorised person, such as an AD Category-I bank and AD Category II. Full-Fledged Money Changers (FFMCs) are also permitted to release exchange for business and private visits.

Detailed explanation-3: -The Reserve Bank of India, is the custodian of the country’s foreign exchange reserves and is vested with the responsibility of managing their investment. The legal provisions governing management of foreign exchange reserves are laid down in the Reserve Bank of India Act, 1934.

Detailed explanation-4: -Exchange control-The forex market is regulated by the RBI with impregnable exchange control regulations. The RBI does not permit a bank to purchase dollars from the RBI and speculate in the interbank market. Selling these dollars in the overseas cross currency market is prohibited by the central bank.

Detailed explanation-5: -RBI’s reserve money is created out of conversion of foreign exchange reserves to local currency and also through bond purchases. To be sure, RBI’s net forex assets reflect the position of such assets net of revaluation.