RBI in concurrence with Union Government revised the Framework under which RBI would enter into bilateral swap agreements with SAARC central banks, who want to avail of swap facility.
- Currency Swap Arrangement (CSA) is a contract under which two counterparties agree to exchange two currencies at a set rate and then to re-exchange those currencies at an agreed upon rate at a fixed date in future.
- Previously, in 2012, SAARC countries set up Framework on Currency Swap mechanism to meet the short-term forex liquidity requirement.
Key Highlights of the revised Framework
- Under the Framework for 2024-27, a separate INR Swap Window has been introduced with various concessions for swap support in Indian Rupee (Total corpus of the Rupee support is ₹250 billion).
- RBI will continue to offer swap arrangement in USD and Euro under a separate US Dollar/ Euro Swap Window with an overall corpus of US$ 2 billion.
Other Significant CSA of India
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Significance of CSAs
- Helps maintain financial stability during a crisis by providing a backstop line of funding for forex liquidity requirements.
- Helps in addressing short-term balance of payments stress.