What is Capital account convertibility? – Capital account convertibility implies the freedom to convert domestic financial assets into overseas financial assets at market determined rates. It can also imply conversion of overseas financial assets into domestic financial assets. Broadly it would mean freedom for firms and residents to freely buy into overseas assets such as equity, bonds, property and acquire ownership of overseas firms besides free repatriation of proceeds by foreign investors. Convertibility also means the right of a foreign exchange holder to convert his earnings into the local currency at the market determined exchange rate and vice versa.
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