1273586,Neha Aggarwal ,f2,question1:- Permitted Currency : what are they?

Introduction Definition of Permitted currency: A currency that is free from legal and regulatory restrictions to be converted into another currency. A permitted currency is often a minor currency, and has a fairly active market for exchanges with major currencies. RBI regulations govern permitted currencies and methods of payment to be used for settlement of financial transactions between residents and non-residents through authorised dealers. Discussion According to a recent press release the Reserve Bank of India has said that the Non residents of India (NRIs) or the persons of Indian origin are now allowed to hold their accounts in the country in any convertible currency. Earlier, Foreign Currency Non Resident (FCNR) bank Account holders were allowed to hold their accounts in certain major currencies such as the Pound Sterling, US dollar, Japanese Yen, euro, Canadian dollar and Australian dollar. This move by the RBI would help the NRIs to a greater extent to reduce the risks involved in the fluctuations of the major currencies and it also gives them more options in their holding of accounts. It has been decided that Authorized Dealer Banks in India may be permitted to accept the Foreign Currency Non – Resident Account (Banks) Deposits in any permitted currency. The RBI is the central banking institution of India and it controls the monetary policy of the rupee. The regulator has recently hiked key interest rates by 25 basis points, which is its 12th such hike since March, 2010. The hike has made auto, home and other loans more expensive. Permitted Methods of Import Payment RBI Circular on Import of Goods and Services talks about permitted methods of payment of import Group           Permitted methods (i) All countries other than those listed under (ii) below (a) Payment in rupees to the account of a resident of any country in this Group   (b) Payment in any permitted currency (ii) Member countries in the Asian Clearing Union (expect Nepal) (a) Payment for all eligible current transactions by debit to the ACU (Asian Clearing Union) dollar account in India of a bank of the participating country in which is resident or by credit to the ACU dollar account of the authorised dealer maintained with the correspondent bank in the other participating country.   (b) Payment in any permitted currency in other cases   Conclusion In my view a 'permitted currency' is used in the Manual to indicate a foreign currency which is freely convertible i.e. a currency which is permitted by the rules and regulations of the country concerned to be converted into major reserve currencies like U.S. Dollar, Pound Sterling and for which a fairly active market exists for dealings against the major currencies. Accordingly, authorised dealers may maintain balances and positions in any permitted currency. There are certain regulations regarding the permitted methods of payment of import which needs to be followed. International trades are allowed only in the permitted currencies