BANKING AFFAIRS

Detailed explanation-1: -The difference between the outflow and inflow of foreign currency is known as Current Account Deficit. Q. Excess of foreign exchange receipts over foreign exchange payments on account of accommodating transactions equals deficit in the balance of payments.

Detailed explanation-2: -A BOP statement of a country indicates whether the country has a surplus or a deficit of funds, i.e. when a country’s export is more than its import, its BOP is said to be in surplus.

Detailed explanation-3: -Net capital outflow (NCO) is the net flow of funds being invested abroad by a country during a certain period of time (usually a year). A positive NCO means that the country invests outside more than the world invests in it.

Detailed explanation-4: -Any transaction which brings in foreign exchange (currency) is recorded on credit side whereas any transaction that causes a country to lose its foreign exchange is recorded on debit side.

Detailed explanation-5: -When a country experiences a large inflow of foreign currency, the central bank will buy the foreign currency and issue local currency to the public. As a result, the international reserves accumulate and people have more money in hand.