GOA, Aug 16: The Reserve Bank of India (RBI) is busy clearing barriers on the road to full convertibility of the rupee, senior central bankers told an annual meeting of the Forex Association of India on Saturday.

"A stage has come when we cannot afford a negative answer to the question on whether capital account convertibility is desirable," Reserve Bank deputy general manager G Padmanabhan told a workshop on capital account convertibility (CAC).

"Someone drew a parallel. Your daughter has to be married. The question is when," he said. "Each of the issues is being discussed threadbare," he said, referring to a roadmap set by the Tarapore-led panel earlier this year for the rupee's full float in three years. The central bank has already announced some steps, like excluding external commercial borrowings (ECBs) over 10 years maturity from an annual ceiling. More measures are in the offing.

The convertibility panel recommended three years of phased reforms before launching a rupee convertible on the capital account. RBI officials at the Goa meeting said they were expressing their personal views.

"We have gone beyond that point (of discussing the desirability of full float)," Reserve Bank general manager (department of external investments and operations) P Krishnamurthy said.

Larsen & Toubro treasurer Krishna Kumar said CAC would help globalisation of Indian industry. He said domestic savings alone could not generate the resources required to build infrastructure, the lack of which was slowing growth in industrial production. "CAC is one of the major options," he said.

Full float will lead to more realistic interest rates and deepen the financial markets, both of which would help firms to become more competitive, he said.

Several delegates felt the pre-conditions for full float set by the committee were too tough. The panel had recommended a reduction in the fiscal deficit to 3.5 percent of gross domestic product, lowering inflation to a 3-5 percent range and cutting banks' bad loan portfolio to five percent of total loans from over 13 per cent.

"We should be looking at the trends rather than the absolute numbers," an RBI official said. The RBI officials said the central bank had taken up issues concerning taxation on new foreign exchange products that would emerge once the rupee is floated.

Documentation of new derivative products and compliance with laws are also the issues under discussion, an official of the Foreign Exchange Dealers Association of India (Fedai) said.

The Institute of Chartered Accountants of India is working on uniform accounting standards in consultation with the Reserve Bank of India,Fedai officials said.

A few bankers expressed concern about lurking fears of capital flight and its consequences."There is a fear the rupee will be traded in London and New York and we won't have much of a job," a treasurer at a private bank said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.