New Delhi, Jan 11 (GCCurrentAffairs) The Union Cabinet on Thursday approved the proposal for entering into an agreement for bilateral swap arrangement (BSA) between India and Japan and authorising the Reserve Bank of India (RBI) to sign the agreement between the central bank and the Bank of Japan for a maximum amount of 75 billion dollar.
The swap arrangement is an agreement between India and Japan to essentially exchange and re-exchange a maximum amount of 75 billion dollars for domestic currency, for the purpose of maintaining an appropriate level of balance of payments for meeting short-term deficiency in foreign exchange, an official statement said here.
The statement added that the arrangement was a very good example of mutual cooperation between India and Japan for strategic objective of assisting each other in times of difficulty and for restoring international confidence. 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. 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.
The arrangement is another milestone in mutual economic cooperation and special strategic and global partnership between India and Japan.