The Reserve Bank of India (RBI), with the approval of the Government of India, has announced a revised framework for the Currency Swap Arrangement for SAARC (South Asian Association for Regional Cooperation) countries. This framework will be in effect from 2024 to 2027, providing a safety net for short-term foreign exchange liquidity needs and balance of payment crises among SAARC countries.

What is a Currency Swap?
A currency swap is an agreement between two countries to exchange currencies under predetermined terms and conditions. This arrangement helps in managing short-term foreign exchange requirements and balance of payment issues.

Key Features of the Revised Framework
Bilateral Swap Agreements: Under the new framework, the RBI will enter into bilateral swap agreements with the central banks of SAARC countries that wish to utilize the swap facility. These agreements aim to provide a financial safety net until more permanent solutions are established.

Introduction of INR Swap Window: A new Indian Rupee (INR) Swap Window has been introduced, offering various concessions for swap support in Indian Rupees. The total amount available under this facility is Rs 250 billion, aimed at enhancing financial cooperation among SAARC countries by providing easier access to Indian Rupees.

US Dollar/Euro Swap Window: In addition to the INR Swap Window, the RBI will continue to offer swap arrangements in US Dollars and Euros through a separate US Dollar/Euro Swap Window. The total amount available under this facility is USD 2 billion, ensuring that SAARC countries have access to multiple currencies for their short-term financial needs.

Historical Context and Goals
The SAARC Currency Swap Facility was initially launched on November 15, 2012, with the primary goal of offering financial support for short-term foreign exchange requirements or balance of payment issues among SAARC nations. The revised framework for 2024-2027 continues this mission, aiming to strengthen economic ties and provide financial stability within the SAARC region.

Eligibility and Benefits
The Currency Swap Facility is available to all SAARC member countries, provided they sign bilateral swap agreements with the RBI. This framework is designed to:

Strengthen economic ties within the SAARC region.
Provide financial stability to member countries.
Help manage foreign exchange needs more effectively.

This initiative underscores the commitment of the RBI and the Government of India to support regional financial stability and economic cooperation among SAARC countries.

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