Capital Account Convertibility
| Tarapore Committee Report on CAPITAL ACCOUNT CONVERTIBILITY | Prepared ByApoorva Soni – 11020241071Pankaj Baid – 11020241021Rashmi Sonare – 11020241123Swapnil Rathi - 11020241134 |
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INDEX
Definition of CAPITAL ACCOUNT CONVERTIBILITY (CAC) 2
CAPITAL ACCOUNT LIBERALISATION IN INDIA SINCE 1997 3
Committee’s Approach to FCAC and Related Issues 10
Interaction of Monetory Policy and Exchange Rate Policy 11
Development of Financial Markets 14
Regulatory and Supervisory Issues in Banking 21
Timing and sequencing of measures for Fuller Capital Account Convertibility 25
The Committee on Capital Account Convertibility (CAC) or Tarapore Committee was constituted by the Reserve Bank of India, under the Chairmanship of Dr. S. S. Tarapore, for suggesting a roadmap on full convertibility of rupee on Capital Account. The committee submitted its report in May 1997 on account of no clear definition of CAC.
Definition of CAPITAL ACCOUNT CONVERTIBILITY (CAC):
Currency convertibility refers to the freedom to convert the domestic currency into other internationally accepted currencies and vice versa. While current account convertibility refers to freedom in respect of ‘payments and transfers for current international transactions’, capital account convertibility (CAC) would mean freedom of currency conversion in relation to capital transactions in terms of inflows and outflows. Article VIII of the International Monetary Fund (IMF) puts an obligation on a member to avoid imposing restrictions on the making of payments and transfers for current international transactions.
The path to fuller capital account convertibility (FCAC) is becoming unidirectional towards greater capital account convertibility. For the purpose of this Committee, the working definition of CAC would be as follows:
“CAC refers to the freedom to convert local financial assets into foreign financial assets and vice versa. It is associated
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INDEX
Definition of CAPITAL ACCOUNT CONVERTIBILITY (CAC) 2
CAPITAL ACCOUNT LIBERALISATION IN INDIA SINCE 1997 3
Committee’s Approach to FCAC and Related Issues 10
Interaction of Monetory Policy and Exchange Rate Policy 11
Development of Financial Markets 14
Regulatory and Supervisory Issues in Banking 21
Timing and sequencing of measures for Fuller Capital Account Convertibility 25
The Committee on Capital Account Convertibility (CAC) or Tarapore Committee was constituted by the Reserve Bank of India, under the Chairmanship of Dr. S. S. Tarapore, for suggesting a roadmap on full convertibility of rupee on Capital Account. The committee submitted its report in May 1997 on account of no clear definition of CAC.
Definition of CAPITAL ACCOUNT CONVERTIBILITY (CAC):
Currency convertibility refers to the freedom to convert the domestic currency into other internationally accepted currencies and vice versa. While current account convertibility refers to freedom in respect of ‘payments and transfers for current international transactions’, capital account convertibility (CAC) would mean freedom of currency conversion in relation to capital transactions in terms of inflows and outflows. Article VIII of the International Monetary Fund (IMF) puts an obligation on a member to avoid imposing restrictions on the making of payments and transfers for current international transactions.
The path to fuller capital account convertibility (FCAC) is becoming unidirectional towards greater capital account convertibility. For the purpose of this Committee, the working definition of CAC would be as follows:
“CAC refers to the freedom to convert local financial assets into foreign financial assets and vice versa. It is associated
References: RBI Report on Capital Account Convertibility – Tarapore Committee headed by S.S Tarapore