What was the purpose of Tarapore Committee?
The Committee on Capital Account Convertibility (CAC) or Tarapore Committee was constituted by the Reserve Bank of India for suggesting a roadmap on full convertibility of Rupee on Capital Account. The committee submitted its report in May 1997.
What is fuller capital account convertibility?
Similarly, capital account convertibility means the freedom to conduct investment transactions without any constraints. Typically, it would mean no restrictions on the amount of rupees you can convert into foreign currency to enable you, an Indian resident, to acquire any foreign asset.
When was capital account convertibility appointed and who was the chairman?
Dr. C. Rangarajan, Governor, Reserve Bank of India, on February 28, 1997 appointed a Committee on Capital Account Convertibility consisting of the following: 1.
Why capital account convertibility is required in an economy?
Local residents would be in a position to diversify their portfolio of assets, which helps them insulate themselves better from the consequences of any shocks in the domestic economy. For global investors, capital account convertibility helps them to seek higher returns by sharing risks.
What is the Tarapore committee?
The Tarapore Committee defined CAC as the freedom to convert local financial assets with foreign financial assets and vice-versa at market determined rates of exchange and mentioned the following as its benefits.
Which account is fully convertible?
In India, there is full current account convertibility since August 20, 1993. India had moved towards a market-determined exchange rate since March 1993. Then the RBI announced in August 1993 that, effective from August 20, India has become fully convertible on the current account.
Why is Indian currency not fully convertible under capital account?
Despite economic progress being made by India on many fronts, there have been regular challenges at both the global and local levels including the global financial crisis of 2008-09, a lack of inflation control, and rising NPAs—all of which have delayed full convertibility of the rupee.
What is Bimal Jalan committee?
Follow. The Reserve Bank of India (RBI) in November 2018 had constituted a six-member committee, chaired by former governor Dr Bimal Jalan, to review the current economic capital framework (ECF), after the Ministry of Finance asked the central bank to follow global practices.
Who is the head of committee for Capital Account Convertibility?
S S Tarapore
As a result, the RBI constituted the Committee on Fuller Capital Account Convertibility with S S Tarapore again as chairman.
Why capital account is not fully convertible?
The International movement of capital is not always free; countries restrict flows of capital as and when needed to safeguard their markets from erratic flows of capital. In India, for example, there are restrictions on the movement of foreign capital and the rupee is not fully convertible on capital account.
Is capital account fully convertible?
However, the rupee continues to remain capital account non-convertible. Capital account convertibility allows freedom to convert local financial assets into foreign financial assets and vice-versa.