What is the role of RBI in foreign exchange market?

RBI has an important role to play in regulating & managing Foreign Exchange of the country. It manages forex and gold reserves of the nation. On a given day, the foreign exchange rate reflects the demand for and supply of foreign exchange arising from trade and capital transactions.

Does RBI regulate foreign exchange?

The Reserve Bank’s exchange rate policy focusses on ensuring orderly conditions in the foreign exchange market. For the purpose, it closely monitors the developments in the financial markets at home and abroad. When necessary, it intervenes in the market by buying or selling foreign currencies.

What role does RBI play to bring down the high exchange rate?

RBI holds its own reserve of foreign exchange. When the foreign exchange rate becomes very high, the RBI can sell currency from its reserve in the market. This will lead to an increase in the supply of foreign currency in the market. The exchange, as a result, will decline.

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What is the role of RBI in fixed exchange rate?

Post independence, India’s exchange rate was fixed by the RBI against pound sterling, under the fixed or pegged exchange rate mechanism. Subsequently the exchange rate under the fixed exchange rate mechanism was changed to dollars and then to a basket of currencies.

What are the powers of RBI under FEMA?

What are the functions of RBI under FEMA?

  • Transfer or issue of foreign security to resident and Indian security to non-resident;
  • Borrowing and lending in foreign exchange or to a foreign person;
  • Export/import of currency or currency notes;
  • Transfer of immovable property outside India;

Who has been Authorised by RBI to deal foreign exchange transactions?

Ans. An Authorised Dealer (AD) is any person specifically authorized by the Reserve Bank under Section 10(1) of FEMA, 1999, to deal in foreign exchange or foreign securities (the list of ADs is available on www.rbi.org.in) and normally includes banks.

How does RBI control currency?

In recent times, in order to stabilize the value of rupee, RBI has taken various measures like clamping restrictions on import of gold, tightening the position limits on currency futures, prohibiting arbitrage trades between futures and OTC markets, rationalizing forex outflows by residents and encouraging capital …

What does RBI do when rupee depreciates?

Currency depreciation increases a country’s export activity as its products and services become cheaper to buy. The RBI intervenes in the currency market to support the rupee as a weak domestic unit can increase a country’s import bill.

Which exchange rate is followed by RBI?

The Reserve Bank of India’s Reference Rate for the US Dollar is ₹ 68.6573 on July 09, 2018.

RBI Reference Rate for US $

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Currency Date
July 06, 2018 July 09, 2018
1 EUR 80.6328 80.7822
1 GBP 91.1432 91.4653
100 YEN 62.25 62.16

What are the powers of RBI in dealing with Authorised person?

Powers of RBI to inspect authorised person

In case the Reserve Bank of India apprehends any suspicious activity related to the aforementioned authorised persons from a third party, they possess the power to inspect the party that is charged. This right is mentioned very clearly in Section 12 of the FEMA.

What are FEMA rules?

According to FEMA guidelines for NRIs, sale proceeds of such assets are non-repatriable outside India without RBI approval. Repatriation of up to USD 1 million per financial year is allowed if you have inherited the property or retired from employment in India.

What is the purpose of the Foreign Exchange Management Act 1999 FEMA )?

[29th December, 1999.] An Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. 1.