Study Material | Test Series
Drishti IAS
call1800-121-6260 / 011-47532596
Drishti The Vision Foundation
(A unit of VDK Eduventures Pvt. Ltd.)
mains Test Series 2018
RBI Hopes for Full Rupee Convertibility
Apr 15, 2015

Reserve Bank of India Governor Raghuram Rajan said the central bank is looking at allowing full capital account convertibility in a few years. Full capital convertibility means a foreign investor can repatriate his money into his own local currency at will, which is not allowed in the country now.

  • Currently RBI has some restrictions is inflows into debt, especially very short-term debt.

  • RBI’s comment on full capital convertibility assumes importance as Finance Minister Arun Jaitley launched the country's first international finance centre in Gujarat. Full rupee convertibility can go a long way in the effective functioning of this global financial services hub.

  • It may be noted that many analysts had credited the RBI for its policy of partial capital control, which helped it tide over the impacts of the currency meltdown that many South Asian economies which had full capital convertibility in 1997-98.

  • In May-August 2013, capital control helped the country from going to the dumps following the taper talks by the US Fed. Even then the country saw as many as over 20 billion dollar being pulled out of the country by foreign investors.

  • Following the June 1991 liberalisation, the government and the RBI have been progressively lifting curbs on capital flows, which saw the FII investment into domestic debt rise to 31 billion dollar now.

 

 


Helpline Number : 87501 87501
To Subscribe Newsletter and Get Updates.

http://www.drishtiias.com/upsc-current-affairs-article-RBI-Hopes-for-Full-Rupee-Convertibility