RBI Introduces New Currency Swap Framework for SAARC Countries (2024-2027)

The Reserve Bank of India (RBI), with approval from the Government of India, has launched a revised Framework on Currency Swap Arrangement for SAARC (South Asian Association for Regional Cooperation) countries, covering the period from 2024 to 2027. This was announced by the RBI on Thursday.

What is a Currency Swap?

A currency swap between two countries is an agreement to exchange currencies with predetermined terms and conditions. This helps countries manage their short-term foreign exchange needs or balance of payment crises.

New Features of the Framework

The revised framework introduces an INR Swap Window, offering various concessions for swap support in Indian Rupees. The total amount available under this facility is Rs 250 billion. Additionally, the RBI will continue to offer swap arrangements in US Dollars and Euros through a separate US Dollar/Euro Swap Window, with an overall amount of USD 2 billion available.

Purpose and Benefits

The primary goal of these agreements is to provide a safety net for short-term foreign exchange liquidity needs or balance of payment crises in SAARC countries until more permanent solutions are established. This move aims to enhance financial cooperation among SAARC countries by providing them with easier access to Indian Rupees and other currencies.

Eligibility

The Currency Swap Facility is available to all SAARC member countries, provided they sign the bilateral swap agreements with the RBI. This framework is designed to strengthen economic ties and provide financial stability within the SAARC region, helping member countries manage their foreign exchange needs more effectively.