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.
Transactions between a major currency, such as the U.S. dollar, and a
permitted currency are smoother than ones between a major currency and a
tightly-controlled one because the permitted currency is more liquid. In
addition, some transactions require the settlement to be made in a major
currency. This terms is quite often used by RBI in forex
related instructions. FEMA Regulations define
it as a foreign currency which is freely convertible.
On another hand we can say that 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. Thus each country have their rules and
regulations for conversion of their currency into major reserve currency or
vis-a-versa operating in the transaction of trade. The expression 'permitted
currency' is used in the Foreign Exchange 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. Authorised
dealers may also maintain positions in Euro of the European Currency Area.
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