BANKING AFFAIRS

Detailed explanation-1: -This means that there is no exchange controls (foreign exchange controls). Similarly, when an importer buys foreign currency from India’s foreign exchange market by exchanging rupee, it is current account convertibility. In India, there is full current account convertibility since August 20, 1993.

Detailed explanation-2: -The rupee has been convertible on the current account since 1994, meaning it can be changed freely into foreign currency for purposes like trade-related expenses. Presently, India has current account convertibility. This means one can import and export goods or receive or make payments for services rendered.

Detailed explanation-3: -Current account convertibility is the ability or freedom to convert domestic currency for current account transactions while capital account convertibility is the ability or freedom to convert domestic currency for capital account transactions.

Detailed explanation-4: -In India, there is full current account convertibility since August 20, 1993. India had moved towards a market-determined exchange rate since March 1993. Then the RBI announced in August 1993 that, effective from August 20, India has become fully convertible on the current account.

Detailed explanation-5: -However, the rupee continues to remain capital account non-convertible. Capital account convertibility allows freedom to convert local financial assets into foreign financial assets and vice-versa.