Convertibility of rupee implies
Answer & explanation
Answer: (c) freely permitting the conversion of rupee to other currencies and vice versa
Currency convertibility means the freedom to exchange the domestic currency for other internationally accepted currencies, and the reverse, without restrictions. Option (c) states exactly this. The other options describe different things: the gold standard, the exchange-rate regime and the development of forex markets.
- ✗ (a) Converting notes into gold belongs to the gold standard. Rupee convertibility concerns exchange with foreign currencies, not gold.
- ✗ (b) A market-determined exchange rate is a feature of the exchange-rate regime. It is not the meaning of convertibility, which is about freedom from controls on currency transactions. India unified its exchange rate on a market basis in 1993, before it accepted current account convertibility in 1994.
- ✓ (c) Convertibility is the freedom to convert rupees into foreign currencies and foreign currencies into rupees. It is the opposite of controls or restrictions on currency transactions.
- ✗ (d) Building a currency market in India may support convertibility but is not what the term means.
Remember · Convertibility is the freedom to exchange rupees for foreign currency and back. India has had current account convertibility since August 1994 (IMF Article VIII), but not full capital account convertibility.
Sources
- RBI – Report of the Committee on Fuller Capital Account Convertibility (Chapter 2, Meaning of Capital Account Convertibility) ↗ “Currency convertibility refers to the freedom to convert the domestic currency into other internationally accepted currencies and vice versa.”
- RBI Press Release, 3 June 1997 – Report of the Committee on Capital Account Convertibility ↗ “India had already adopted current account convertibility in August 1994 by formally accepting the obligations under Article VIII of the Articles of Agreement of the International Monetary Fund (IMF).”
Question: UPSC Civil Services (Preliminary) 2015, General Studies Paper I. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). ·
