Mumbai: Hinting at further easing of capital account convertibility norms, Reserve Bank of India Deputy Governor TR Shankar on Thursday said the country is on the cusp of some fundamental changes with regard to currency management. Addressing the annual meeting of the Foreign Exchange Dealers Association of India (FEDAI), Shankar said that India has come a long way in achieving increasing levels of convertibility on capital account and to achieve a stable structure of foreign capital inflows. In this sense, policy choices have yielded widely desired results.
Convertibility refers to the ability to convert domestic currency into foreign currency and foreign currency into domestic currency for making payments for balance of payments transactions. Whereas current account convertibility is the ability or freedom to convert domestic currency for current account transactions whereas capital account convertibility is the ability to convert domestic currency for capital account transactions. Though the Indian Rupee is fully convertible for current account transactions, the Reserve Bank allows limited transactions only in the case of capital account. He said, “India stands on the cusp of some fundamental changes in this sector with market integration.”