The panel set by by the Reserve Bank of India on a capital account convertibility roadmap has said the country should move towards fuller capital account convertibility over five years in three phases ending in the fiscal year 2010-11."RBI said it had set up a task force that would give its suggestions on the "implementable" proposals by December this year.The panel has also suggested a ban on fund inflows under participatory notes (PN) after providing the PN holders an exit route. PNs should be phased out within a year, it suggested.It also recommended raising of the ceiling on external commecial borowings for automatic approval and suggested that non-resident Indians should be allowed to invest in capital markets. The other suggestions were allowing tax benefits for NRI deposits and improvement of banking regulation/supervision.In a 300 page document released by the RBI today, the panel said gradual capital account liberalisation for Indian banks and companies was desirable and it recommended the central bank had "unfettered instrument independence" in attaining monetary policy objectives agreed with the government. If the road map goes ahead, it will be India's biggest reform in more than a decade."The approach of the committee is to rationalise and gradually liberalise the controls," it said. "The committee recommends that at the end of the five-year period ending in 2010-11, there should be a comprehensive reviewto chalk out the future course of action."The six-member committee appointed by the central bank began working on the roadmap after Prime Minister Manmohan Singh said in March the country's economic condition internally and externally had become far more comfortable in the past few years. The report was submitted to the central bank on July 31.The government made the rupee convertible on the current account in 1994. This means it can be converted freely for specific purposes like trade-related expenses, corporate interest payments on loans taken abroad and business travel, among others.
