Conversion of Rupees

5275 Words Feb 6th, 2016 22 Pages
A
PAPER
On
“CONVERTIBILITY OF INDIAN RUPEE”

By, Sr. No | Name | PRN | 1 | Mr. Sachin Jadhav | 15020448102 | 2 | Mr. Santosh Ghongade | 15020448103 | 3 | Mr. Rajan Batra | 15020448104 | 4 | Mr. Narayan P.S | 15020448105 | 5 | Mr. Sameep Gadkari | 15020448106 | 6 | Mr. Nandkumar | 15020448015 | 7 | Mr. Bhushan Patil | 15020448027 | 8 | Mr.Vikrant Birje | 15020448056 |

Guided By,
Prof.S.K.Vaze
International Financing

TABLE OF CONTENTS

Sr. No | Topics | Page No. | 1 | Objectives | 3 | 2 | Foreign Exchange-An Overview | 3 | 3 | Convertibility of Indian Rupee-History | 4 | 4 | Convertibility of Currency-Meaning | 4
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2. Convertibility of Indian Rupee-HISTORY
In 70’s and 80’s many countries switched over to the free convertibility of their currencies into foreign exchange. By 1990, 70 countries of the world had introduced currency convertibility on current account; another 10 countries joined them in 1991.
As a part of new economic reforms initiated in 1991, rupee was made partly convertible. From March 1992 under the “Liberalized Exchange Rate Management scheme”, in which 60% of all receipts on current account (i.e. merchandise exports and invisible receipts) could be converted freely into rupees at market determined exchange rate quoted by authorized dealers (AD), while 40% of them was to be surrendered to Reserve Bank of India at the officially fixed exchange rate.
These 40% exchange receipts on current account was meant for meeting Government needs for foreign exchange and for financing imports of essential commodities.
This partial convertibility of rupee on current account was adopted so that essential imports could be made available at lower exchange rate to ensure that their prices do not rise much. Further, full convertibility of rupees at that stage was considered to be risky in view of large deficit in balance of payments on current account.
As even after partial convertibility of rupee, foreign exchange value of rupee remained stable. Full convertibility on current account was announced in the budget 1993-94. From March 1993,
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