INTRODUCTION
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.
MEANING 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.
DEFINITION
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.
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Authorised dealers should exercise
care and circumspection while accepting payments.
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offered by exporters and others in
currencies not generally known as freely convertible currencies and ensure by
proper enquiry with their overseas branches / correspondents that the
currency qualifies to be treated as a permitted currency in order that the
foreign exchange so acquired does not become immobilised or is otherwise not
subject to restrictions imposed in the foreign country on its use for
international payments
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Authorised dealers may sometimes
be approached by their customers who are engaged in export/import trade
consultancy services etc. for advice regarding choice of currencies.
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besides Indian rupee SDR or Euro
for the purpose of contracting with their overseas counterparts. Authorised
dealers may advise their customers that while there are no restrictions from
the Exchange Control viewpoint on any foreign currency being chosen Exim
Policy stipulates that all export contracts and invoices (except those for which
payments are required to be received through the Asian Clearing Union) shall
be denominated only in a freely convertible foreign currency. They may also
be advised that settlement of payments in terms of the contracts will
eventually have to take place in a 'permitted currency' and they will be well
advised to choose one of such currencies even for contracting purposes.
Additionally although authorised dealers are allowed in terms of paragraph
3C.1 to provide forward cover to residents in any 'permitted currency' the
absence of a forward exchange market in India or in an overseas centre for
covering the exchange risk of authorised dealers in even some of the
permitted currencies may result in residents being unable to protect
themselves against exchange risk in case of need. The choice of currencies
for the purpose of contracting should therefore be made after proper
assessment of these factors
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Authorised Dealers' Foreign
Currency Accounts
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Authorised dealers may freely open and maintain accounts
in any permitted currency with their branches and correspondents abroad. A
report should be sent to the office of Reserve Bank to
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whom R Returns are submitted by authorised dealers as soon
as a new account is opened abroad giving the name and address of the foreign
branch or correspondent with whom the account has been opened.
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Authorised dealers should receive
remittances from foreign countries (other than Nepal & Bhutan) or obtain
reimbursement from their branches and correspondents in those: countries
against payments
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due for exports from India and
other payments in a manner conforming to the methods of payment indicated
below:
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Group
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Permitted
methods
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(i)
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All countries other than those
listed under (ii) below
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(a)
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Payment in rupees form the account
of a bank situated in any country in this Group
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(b)
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Payment in any permitted currency
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(ii)
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Member countries in the Asian
Clearing Union (expect Nepal)
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(a)
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Payment for all eligible current
transactions by debit to the ACU 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.
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(b)
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Payment in any permitted currency
in other cases
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Authorised dealers should make
remittances from India or provide reimbursement to their overseas branches
and correspondents in foreign countries (other than Nepal and Bhutan):
against payments
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due for imports into India and
other payments in a manner conforming to the methods of payment indicated
below:
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Group
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Permitted
methods
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(i)
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All countries other than those
listed under (ii) below
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(a)
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Payment in rupees to the account
of a resident of any country in this Group
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(b)
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Payment in any permitted currency
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(ii)
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Member countries in the Asian
Clearing Union (expect Nepal)
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(a)
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Payment for all eligible current
transactions by debit to the ACU 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.
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(b)
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Payment in any permitted currency
in other cases
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