Explanation:

Here’s the thing—LERMS stands for Liberalized Exchange Rate Management System. This was India’s way of handling foreign exchange after the 1991 crisis.

- Under LERMS, exporters had to surrender 40% of their foreign exchange earnings to the RBI at the official exchange rate.

- The remaining 60% could be converted at the market-determined rate.

- The point was to make forex partly available to the government at a favorable rate while allowing some flexibility.

Now, about the options:

- Option 1 (20%): Too low.

- Option 2 (60%): That refers to the amount converted at the market rate, not the official rate.

- Option 3 (30%): Also too low.

- Option 4 (40%): This is correct. Exporters handed over 40% at the official rate.