The Reserve Bank of India (RBI) has introduced a revised Framework on Currency Swap Arrangement for SAARC (South Asian Association for Regional Cooperation) countries covering the years 2024–2027, with approval from the Indian government, the RBI announced on Thursday.
The RBI will negotiate bilateral swap agreements with the central banks of SAARC nations that want to make use of the swap facility under the new framework. These agreements serve as a safety net for SAARC countries' short-term foreign exchange liquidity needs or balance of payments crises while more long-term solutions are being worked out.
What is currency swap facility?
An agreement or contract to exchange currencies with specified terms and conditions is called a currency swap between two countries.
First launched on November 15, 2012, the SAARC Currency Swap Facility. Funding short-term foreign exchange needs, or the balance of payments among SAARC countries, was its main objective.
New framework for swap window
With the introduction of the new INR Swap Window and its numerous concessions for swap support in Indian Rupees, the framework for 2024–2027 has been revised.
There is a total of Rs 250 billion available under this facility. By facilitating their access to Indian Rupees, this action seeks to improve financial cooperation among SAARC nations.
The RBI will continue to provide swap agreements in US dollars and euros through a distinct US dollar/euro swap window in addition to the INR Swap Window.
A total of USD 2 billion is available under this facility. By doing this, the SAARC nations are guaranteed access to a variety of currencies for their immediate financial needs.
Eligible Countries
All SAARC members, including Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka, are eligible to use the currency swap facility.
Providing they formally carry out the bilateral swap arrangements with the RBI. This framework is expected to enhance financial stability and strengthen economic ties within the SAARC region, while also assisting member countries in effectively managing their foreign exchange requirements.
