New Delhi: The Union Cabinet on Thursday approved a proposal for a $75-billion bilateral swap arrangement between India and Japan, a move aimed at enhancing the RBI's ability to manage exchange rate volatility.
In a release, the government said the Cabinet chaired by Prime Minister Narendra Modi has approved the proposal for entering into an agreement for the bilateral swap arrangement (BSA) between India and Japan.
The arrangement authorises the Reserve Bank of India (RBI) to sign the agreement for bilateral swap arrangement between the RBI and the Bank of Japan for a maximum amount of $75 billion.
"The swap arrangement is an agreement between India and Japan to essentially exchange and re-exchange a maximum amount of $75 billion for domestic currency, for the purpose of maintaining an appropriate level of balance of payments for meeting short-term deficiency in foreign exchange," the release said.
On benefits of the arrangement, it said the BSA is a good example of mutual cooperation between India and Japan for the 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 the stability of a 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 release said.
The arrangement, it added, is "another milestone" in mutual economic cooperation and special strategic and global partnership between India and Japan.
The arrangement was announced during Modi's visit to Japan in October last year.
To keep watching India’s No. 1 English Business News Channel – CNBC-TV18, call your Cable or DTH Operator and ask for the Colors Family Pack (inclusive of 24 channels), available for Rs. 35/- per month, or subscribe to the channel for Rs. 4/- per day.
To keep watching the Leader in Global Market & Business News – CNBC-TV18 Prime HD, call your Cable or DTH Operator and ask for the Colors Family HD Pack (inclusive of 25 channels), available for Rs. 50/- per month, or subscribe to the channel for Rs. 1/- per day.
Firstpost is now on WhatsApp. For the latest analysis, commentary and news updates, sign up for our WhatsApp services. Just go to Firstpost.com/Whatsapp and hit the Subscribe button.
Updated Date: Jan 11, 2019 15:52:20 IST