Full convertibility of Rupee

The Government when introduced the Partial convertibility of Rupee in 1992, had announced its intention to introduce the full convertibility on the current account in 3-5 years. The full convertibility means unified market determined exchange rate regime. Encouraged with the success of the LERMS, the government introduced the full convertibility of Rupee in Trade account from March 1993 onwards. With this the dual exchange rate system was abolished and LERMS was now based upon the open market exchange. The full convertibility of Rupee was followed by stability in the Rupee Rate in the next many months coming up.

• The above full convertibility was introduced on Trade account. The Government wanted to introduce the Full convertibility of Rupee on Current account (means invisible also included).
• In August 1994, the Government of India declared full convertibility of Rupee on Current account with announcing some relaxations as per requirements of the Article VIII of the IMF.

These were:

1. Repatriation of the income earned by the NRIs and overseas corporate bodies of NRIs in a Phased manner in 3 years period.
2. The ceiling for providing foreign exchange for foreign tours, education, medical treatment, gifts and services was made just an indicative. Above this ceiling, foreign exchange could be obtained for payments, while making a reference to RBI.
3. While the Principal amount on the NRNR (Non Resident Non Repatriable) Accounts was non repatriable, the interest was made repatriable.