RBI Dy Guv: Banks must put together for capital account convertibility

Reserve Bank of India (RBI) Deputy Governor T Rabi Sankar on Thursday stated market members, significantly banks, must put together themselves to handle the enterprise course of modifications and the worldwide dangers related to capital convertibility.
“India has come a long way in achieving increasing levels of convertibility on the capital account,” Sankar stated at a convention organised Foreign Exchange Dealers’ Association of India. “It has broadly achieved the desired outcome for the policy choices it has made, in terms of achieving a stable composition of foreign capital inflow. At the same time, India is on the cusp of some fundamental shifts in this space with increased market integration in the offing and freer non-resident access to debt on the table,” he stated.
“The rate of change in capital convertibility will only increase with each of these and similar measures,” Sankar stated. “With that comes the responsibility to ensure that such flows are managed effectively with the right combination of capital flow measures, macro-prudential measures and market intervention…,” he stated.
Convertibility refers back to the capability to transform home forex into overseas ones and vice versa to make funds for steadiness of funds transactions. “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.”