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 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 is the main role of RBI?
First and foremost, the RBI formulates, implements, and monitors India’s monetary policy. The bank’s management objective is to maintain price stability and ensure that credit is flowing to productive economic sectors. The RBI also manages all foreign exchange under the Foreign Exchange Management Act of 1999.
What is the exchange control of RBI?
A person resident in India may enter into a foreign exchange derivative contract in accordance with provisions contained in Schedule I, to hedge an exposure to risk in respect of a transaction permissible under the Act, or rules or regulations or directions or orders made or issued thereunder.
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;
What role does RBI play to bring down the high exchange rate and how does it do so?
It can intervene directly in the currency market by buying and selling dollars. If RBI wishes to prop up rupee value, then it can sell dollar and when it needs to bring down rupee value, it can buy dollars. The central bank can also influence the value of rupee by the way of monetary policy.
How does RBI stabilize foreign 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 …
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.
Who operates monetary policy in India?
The Reserve Bank of India (RBI) is vested with the responsibility of conducting monetary policy. This responsibility is explicitly mandated under the Reserve Bank of India Act, 1934.
Who regulates foreign trade in India?
Foreign trade in India includes all imports and exports to and from India. At the level of Central Government it is administered by the Ministry of Commerce and Industry.