India-Japan walk down the economic aisle over Bilateral Swap Arrangements..!

New Delhi, February 28: India and Japan, striding towards the economic stability of the financial markets and thereby further developing the trade ties between, have entered into the bilateral swap arrangements up to USD 75 billions, being into effect from today. 

 

The Bank of Japan, acting as an agent for Japan’s Finance Ministry and the Reserve Bank of India signed a Bilateral Swap Arrangement which enables both countries to swap their local currencies, Japanese yen or Indian rupee against US dollar for an amount of up to USD 75 billion.

The authorities of both countries believe that, by enhancing financial cooperation, the BSA will contribute to the stability of financial markets, thereby further developing the economic and trade ties between the two countries. Meanwhile now, India can acquire yen or dollars from Japan upto USD 75 billion in exchange for rupees. Conversely, Japan can also seek dollars from India in exchange for yen.

 

BSA is a superlative example of mutual cooperation between India and Japan for strategic objective of assisting each other in times of difficulty and for restoring international confidence. The arrangement is another milestone in mutual economic cooperation and special strategic and global partnership between India and Japan.

Swap arrangement is an agreement between the nations to essentially exchange and re-exchange a maximum stated amount for domestic currency, for maintaining an appropriate level of balance of payments and for meeting short-term deficiency in foreign exchange. It refers to an arrangement between central banks to allow each other credit in their respective currencies so as to make currency transactions easier. 

“This facility will enable the agreed amount of Capital being available to India on tap for use. Also, with this arrangement in place, prospects of Indian companies would improve in tapping foreign capital as there would be greater confidence in stability of country’s exchange rate”, uttered the statement.

“Availability of such swap line to tide over difficulties arising out of Balance of Payment (BOP) would deter speculative attacks on the domestic currency and greatly enhance the RBI’s ability to manage exchange rate volatility”, it signed off further.