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Date : Sep 01, 2006
RBI releases Report of the Committee on Fuller CAC; Sets up a Task Force to untie Knots in Forex Management Systems

The Reserve Bank of India today releases the Report of the Committee on Fuller Capital Account Convertibility on its website ( The report was submitted to the Reserve Bank of India on July 31, 2006. The Committee, chaired by Shri S.S. Tarapore, was set up by the Reserve Bank of India in consultation with the Government of India to revisit the subject of fuller capital account convertibility in the context of the progress in economic reforms, the stability of the external and financial sectors, accelerated growth and global integration. Dr. Surjit S. Bhalla, Shri M.G. Bhide, Dr. R.H. Patil, Shri A.V. Rajwade and Dr. Ajit Ranade were the members of the Committee.

The Reserve Bank of India has also constituted an internal task force to re-examine the extant regulations and make recommendations to remove the operational impediments in the path of liberalisation already in place. The Task Force will make its recommendations on an ongoing basis and the processes are expected to be completed by December 4, 2006. The Task Force has been set up following a recommendation of the Committee.

The report of the Committee, apart from undertaking an assessment of the measures taken towards capital account liberalisation since 1997, also provides an overview of the Committee’s approach to the subject. It sets out the conditions that would be concomitant to a move towards fuller capital account convertibility. Accordingly, it addresses issues related to interaction of monetary policy and exchange rate management, development of financial markets, regulation/supervision of banks and the timing and sequencing of measures.

The report will be processed and measures may be taken from time to time by the various authorities concerned, keeping in view the framework under the roadmap suggested and the evolving circumstances, both domestically and internationally.

The Committee had, while considering fuller capital account convertibility, incidentally observed that though the overall regime had undergone a significant degree of liberalisation, in practice, some regulations relating to an earlier period of tight controls continued to remain, giving rise to a disconnect between the regulatory intent and the procedure in use. There was a need to untie the knots in the foreign exchange management systems to make liberalisation meaningful. It, inter alia, recommended that a Reserve Bank of India task force should be set up immediately to identify the anomalies in the present regulatory framework for current and capital accounts.

Alpana Killawala
Chief General Manager

Press Release: 2006-2007/320