RBI announced SAARC currency swap framework for 2024-2027.
- 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.
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.
Other significant Currency Swap Agreements (CSAs) that India has entered into:
- BRICS Contingent Reserve Agreement: This was signed in 2015 among the BRICS nations (Brazil, Russia, India, China, and South Africa).
- India-Japan bilateral CSA: This agreement amounts to $75 billion.
- Others: The image mentions additional CSAs, specifically noting India-UAE CSA and India-Sri Lanka CSA.