Convertibility of rupee refers to the ability to freely convert the domestic currency (rupee) into other currencies and vice versa. It implies that individuals and entities can exchange rupees for foreign currencies and use them for international transactions, such as trade, investment, and travel. Similarly, foreign currencies can be converted into rupees for domestic transactions.

The conversion is typically done through authorized financial institutions, such as banks and authorized currency exchange providers. The exchange rate between the rupee and other currencies is determined by market forces, including supply and demand in the foreign exchange market.

Convertibility of rupee promotes international trade and investment, facilitates cross-border transactions, and allows for easier integration with the global economy. It allows individuals and businesses to hedge against currency risks, diversify their holdings, and participate in international financial markets.