RBI revises framework on currency swap arrangement for SAARC countries

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News:The Reserve Bank has said that it has put in place a revised framework on currency swap arrangement for SAARC countries for 2019-2022.

Facts:

About currency swap arrangement:

  • A currency swap between countries is an agreement to exchange currencies with predetermined terms and conditions. 
  • The countries engage in currency swaps with foreign counterparts to meet short term foreign exchange liquidity requirements or to ensure adequate foreign currency to avoid Balance of Payments(BOP) crisis till longer arrangements can be made.

About the framework:

  • The SAARC currency swap facility framework came into operation on November 15, 2012.
  • Under the revised framework for 2019-22, the Reserve Bank of India will continue to offer swap arrangement within the overall corpus of $2 billion. 
  • The currency swap facility will be available to all SAARC member countries subject to their signing the bilateral swap agreements.
  • Based on the terms and conditions of the framework,the RBI would enter into bilateral swap agreements with SAARC central banks who want to avail swap facility.
  • The drawls can be made in US dollar, euro or Indian rupee.The framework also provides certain concessions for swap drawals in Indian Rupee. 

Additional information:

About SAARC:

  • The South Asian Association for Regional Cooperation(SAARC) was established with the signing of the SAARC Charter in Dhaka on 8 December 1985.
  • SAARC comprises of eight Member States namely Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.The Secretariat of SAARC is in Kathmandu,Nepal.

Objectives of SAARC:The objectives of the Association as outlined in the SAARC Charter are to:

  • promote the welfare of the people of South Asia and to improve their quality of life 
  • to accelerate economic growth, social progress and cultural development in the region and 
  • to promote and strengthen collective self-reliance among the countries of South Asia.