What Is Saarc Currency Swap Agreement

As countries in the South Asian region take individual measures to combat COVID-19, cross-currency swaps have become an important instrument of economic cooperation in the region, writes Partha Pratim Mitra for South Asia Monitor as part of 2019-22, the RBI will continue to offer swap arrangements within a total of $2 billion. Draws can be made in US dollars, euros or Indian rupees. The framework provides for certain concessions for exchange draws in Indian rupee. Subsequently, on March 25, 2015, the RBI signed a $400 million currency swap agreement with the Central Bank of Sri Lanka under the current SAARC cross-currency swap framework for a total of $2 billion. Under the agreement, the Central Bank of Sri Lanka can raise up to $1.1 billion for up to six months. The contract is valid for a period of three years from the date of signature. The agreement will also promote financial stability in the region. On 17 July 2015, the RBI signed another special agreement on cross-currency swaps with the Central Bank of Sri Lanka. Under the agreement, the Central Bank of Sri Lanka can raise up to $1.1 billion for up to six months. The proposal to extend the USD 1.1 billion additional cross-currency swap facility for the limited period was approved by the Government of India in April 2015 on the basis of the RBI`s recommendation to reduce possible currency volatility in a spirit of strengthening India`s bilateral relations and economic cooperation with Sri Lanka. The facility will be available to all SAARC member countries, subject to the signing of bilateral swap agreements, she added. Based on the terms of the framework, the RBI would enter into bilateral swap agreements with SAARC central banks wishing to use a swap facility.

In November last year, the RBI, with the approval of the Government of India, decided to create a revised framework for the 2019-2022 SAARC Currency Exchange Agreement with the aim of promoting financial stability and economic cooperation in the SAARC region. .