SAARC : Currency Swap Agreement

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SAARC Swap Framework

  • The Framework on Currency Swap Arrangement for SAARC Member Countries was formulated with the intention to provide a line of funding for short term foreign exchange requirements or to meet the balance of payments crises till longer-term arrangements are made or the issue is resolved in the short-term itself. 
  • It was approved by the Government of India on March 1st, 2012.
  • Under the framework RBI offers swaps of varying sizes to each SAARC Member countries depending on their two months import requirement, not exceeding US$ 2 billion in total, in USD, Euro or INR.

Recent Changes in framework:

  • The Union Cabinet has approved the amendments to the framework on currency swap arrangement for SAARC member countries.
  • The amendments incorporate a standby facility of USD 400 million.
  • This stand-by facility enables India to provide a prompt response to the current request from SAARC member countries for availing the swap amount exceeding the present limit prescribed under the SAARC Swap Framework.

Benefits to SAARC and India

  • The agreement has enabled India to strengthen its ties with the SAARC countries together with improving financial stability in the region.
  • This agreement also bolsters the credibility of India among the SAARC countries.
  • Together with enhancing India’s economic influence in the region, the agreement strengthen regional integration and inter-dependence.