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Current Account Convertibility Explained

Current account convertibility allows residents to make and receive payments related to trade, including receiving foreign currencies for exports and paying foreign currencies for imports. It also permits residents to transfer funds for travel, education abroad, medical expenses, and gifts. Current account convertibility freely allows inflows and outflows for all purposes except capital purposes like investments and loans. Capital account convertibility is defined as the freedom to convert local financial assets into foreign assets and vice versa at market exchange rates, simply allowing residents to convert currencies to invest in foreign shares, properties, and other assets.

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Fatima Ali
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83 views1 page

Current Account Convertibility Explained

Current account convertibility allows residents to make and receive payments related to trade, including receiving foreign currencies for exports and paying foreign currencies for imports. It also permits residents to transfer funds for travel, education abroad, medical expenses, and gifts. Current account convertibility freely allows inflows and outflows for all purposes except capital purposes like investments and loans. Capital account convertibility is defined as the freedom to convert local financial assets into foreign assets and vice versa at market exchange rates, simply allowing residents to convert currencies to invest in foreign shares, properties, and other assets.

Uploaded by

Fatima Ali
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Current account convertibility enables residents to make and receive trade-related payments - receive dollars, or any other foreign

currency, for export of goods and services and pay dollars (or any other foreign currency) for import of goods and services. It also allows residents to make sundry remittances, access foreign currency for travel, studies abroad, medical treatment and gifts. Simply put, current account convertibility allows free inflows and outflows for all purposes other than for capital purposes such as investments and loans. Capital account convertibility (CAC), as defined by the Tarapore Committee, is the freedom to convert local financial assets into foreign financial assets and vice versa at market determined rates of exchange. Simply, it allows residents to convert (buy or sell) currencies to make investments into foreign shares, properties and other assets.

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