Unravelling Full Convertibility

Capital account convertibility means the freedom to convert local financial assets into foreign financial assets and vice versa at market determined exchange rates.

It could be necessitated by changes in ownership in foreign or domestic financial assets and liabilities and embodies the creation and liquidation of claims on, or by, the rest of the world. CAC can, and is, co-existent with restrictions other than on external payments.

It does not preclude the imposition of monetary or fiscal measures relating to foreign exchange transactions which are of a prudential nature.