Foreign currency convertible bonds and indian rupee essay

Convertibility of a currency implies that a currency can be transferred into another currency without any limitations or any control. A currency is said to be fully convertible, if it can be converted into some other currency at the market price of that currency. At present, Indian rupee is partly convertible on current Account.

Foreign currency convertible bonds and indian rupee essay

The present currency system in India i. It has two aspects: The internal aspect deals with the circulation of coins and currency notes, while the external aspect deals with the external value of currency and the way it is regulated.

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The main features of the present currency system in India are given below: The main developments in Indian coins, particularly after independence, are as follows: Intwo developments took place: Intwo rupee note was added to meet the growing demand for rupees.

The nickel rupee coin came into being in Under this system, the Indian rupee was divided into naya paise. The nomenclature of naya paisa has now been changed to simply paise.

To start with old coins remained in circulation along with new coins, but with effect from January 1, old coins ceased to be legal tender. All accounts are now kept in terms of rupees and paise. One rupee coin, one rupee note and the coins of lower denomination are issued by the Ministry of Finance, Government of India.

The rupee and the half rupee coin are unlimited legal tender, while all other coins are limited legal tender up to Rs. At present, the coins of the denominations of 1,2,3,5,10,20,50 and paise are in circulation. With the exception of one-rupee notes, all other notes are issued by the Reserve Bank of India.

The Reserve Bank of India maintains a separate Issue Department which deals with issuing of the currency notes. At present, notes of rupees 2, 5, 10, 50, and denominations are in circulation.

All these notes are convertible into each other and are unlimited legal tender. System of Notes Issue: Originally, the Reserve Bank of India Act provided for the proportional reserve system of note issue.

After independence, with the introduction of economic planning, it was felt that the proportional reserve system was not adequately elastic to meet the developmental needs of the country.

Its foreign exchange reserves fell from Rs.

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Consequently, the Reserve Bank of India Act was amended in and the proportional system of note issue was replaced by the minimum reserve system. According to this amendment, the Issue Department of the Reserve Bank was required to keep a minimum of Rs.

In Novemberthe Reserve Bank of India Act was again amended to reduce the minimum currency reserve in foreign securities. Under the second amendment, the value of overall minimum reserve to be maintained by the Reserve Bank is Rs.

Foreign Currency Convertible Bonds (FCCBs) | Bonds | Company Management

Thus, the present system of issuing notes in India is based on the minimum reserve method. The chief merit of this system is that it is perfectly elastic; supply can be increased up to any limit. But, there is also the danger of over-issue and inflation under such a purely managed system.

Expansion of Indian Currency: There has been a continuous expansion of Indian Currency since independence. The main reason for this expansion is deficit financing to meet the growing needs of money supply during the planning period.A fully convertible currency can be traded without any government restriction for another currency.

The trade can be either to sell the domestic currency (to take funds out of the country for example) or to buy the domestic currency (foreign investors for instance) Indian Rupee is not fully. A currency is said to be fully convertible, if it can be converted into some other currency at the market price of that currency.

At present, Indian rupee is partly convertible on current Account. That is convertibility in the case of transactions relating to exchange of goods and services, money transfer. 1 A "foreign bond" issue is a) one denominated in a particular currency but sold to investors in national capital markets other than the country that issued the denominating currency.

b) one offered by a foreign borrower to investors in a national market and denominated in that nation's currency. A fully convertible currency can be traded without any government restriction for another currency. The trade can be either to sell the domestic currency (to take funds out of the country for example) or to buy the domestic currency (foreign investors for instance).

Foreign currency convertible bonds and indian rupee essay

This article provides an essay on foreign exchange rate in India. Introduction: It should be noted that since March India has adopted flexible exchange rate system and has also now made its rupee convertible into a foreign currency.

In fact, at present the Indian rupee can appreciate or depreciate every day depending on the demand for. Foreign Currency Convertible Bonds and Indian Rupee Essay The Impact of INR depreciation on the Foreign Currency Convertible Bonds (FCCBs) issued by Indian Corporates A convertible bond is a type of corporate bond that the holder can convert, within maturity, into a.

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