Multiple choice

Full convertibility of the rupee means

  1. Fully free foreign exchange market for trading various currencies unrestricted

  2. Single rate of rupee vis a vis other foreign currencies to be determined on day to day basis

  3. Single rate to be fixed by RBI for dealing in other currencies

  4. Freedom to enter into with the foreign countries for imports & exports
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Full convertibility of the rupee means a single exchange rate determined daily by market forces in a free foreign exchange market. This implies unrestricted convertibility at a market-determined rate, not a fixed RBI rate or multiple rates. Option B captures this correctly - the rate is determined on a day-to-day basis.

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