What is Currency Convertibility?
A. Currency convertibility may be defined as the freedom to convert one currency into other internationally accepted currencies. There are two forms of convertibility convertibility for current international transactions and the convertibility for international capital movements. Currency convertibility implies the absence of exchange controls or restrictions on foreign exchange transactions. India has made the rupee convertible on the current account. Current account convertibility has been defined as the freedom to buy or sell foreign exchange for • The international transactions consisting of payments due in connection with foreign trade, other current businesses including services and normal short-term banking and credit facilities • Payments due as interest on loans and as net income from other investments • Payment of moderate amounts of amortisation of loans for depreciation of direct investments • Moderate remittances for family living expenses • Authorised Dealers may also pro
Currency convertibility refers to the level of difficulty that would be encountered if an attempt was made to convert the hard currency of a given country into gold or the currency issued by another country. There are a number of different factors that can impact the level of currency convertibility that exists between currencies issued by any two countries. Political, social, and environmental issues can all play a part in determining how easy or how hard it is to exchange gold or other forms of currency for any one currency. Political factors often play a role in determining the level of currency convertibility that is currently possible with any given currency. In the event that the issuing country is considered to be politically unstable, chances are that the ability to convert the currency will be somewhat more difficult, or at the very least yield an undesirable rate of exchange. Generally, when there is a change in government that is considered to be favorable by other countries
Currency convertibility means the freedom to convert one currency into other internationally accepted currencies. There are two popular categories of currency convertibility, namely : Convertibility for current international transactions; and Convertibility for international capital movements. Currency convertibility implies the absence of exchange controls or restrictions on foreign exchange transactions. What is meant by Current Account Convertibility: Current account convertibility is popularly defined as the freedom to buy or sell foreign exchange for :- a. The international transactions consisting of payments due in connection with foreign trade, other current businesses including services and normal short-term banking and credit facilities b. Payments due as interest on loans and as net income from other investments c. Payment of moderate amounts of amortisation of loans for depreciation of direct investments d. Moderate remittances for family living expenses e. Authorised Dealer
