Tuesday, August 11, 2009


"Regulating all foreign exchange activities and matters by and bringing them under the jurisdiction of a centralized authority is referred to as exchange control.

To import goods the importer pays to the commercial bank amount in the local currency. The bank, in turn, surrenders the local currency to the central bank for foreign exchange in order to pay it to the exporter. Conversely, in exporting goods, the central bank receives foreign exchange which it retains with itself and deposits with the commercial bank the equivalent amount in the local currency which is finally paid to the exporter.

In short all receipts and payments of foreign exchange are made through a central bank.

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