RBI Dy Guv: Banks will need to prepare for capital account convertibility
Reserve Bank of India (RBI) Deputy Governor T Rabi Sankar said on Thursday that market players, especially banks, will need to prepare to manage changes in business processes and the global risks associated with convertibility of capital.
“India has come a long way to achieve increasing levels of convertibility in the capital account,” Sankar said at a conference hosted by the Foreign Exchange Dealers’ Association of India. “He has largely achieved the desired result for the political choices he made, in terms of obtaining a stable composition of foreign capital inflows. At the same time, India is on the cusp of some fundamental changes in this space with increased market integration on the horizon and freer access to debt for non-residents, ”he said. declared.
“The rate of change in the convertibility of capital will only increase with each of these and similar measures,” Sankar said. “With that comes the responsibility of ensuring that these flows are managed effectively with the right mix of capital flow measures, macro-prudential measures and market intervention …” he said. .
Convertibility refers to the ability to convert domestic currency into foreign currency and vice versa to make payments for balance of payments transactions. “Current account convertibility is the ability or freedom to convert national currency for current account transactions, while capital account convertibility is the ability or freedom to convert national currency for capital account transactions. . “