The Reserve Bank of India (RBI) has revised the 'Currency Swap Arrangement' for the South Asian Association for Regional Cooperation (SAARC), which also includes Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka, for the period 2024-27, according to an official statement on Thursday.
The currency swap facility would enable the receiving country to avail concessionary credit from the central bank of India at predetermined rates, which would help them manage their forex reserves better and boost financial stability.
At the same time, it would also expand the use of the rupee on the subcontinent.
The RBI said that the decision was approved by Prime Minister Narendra Modi’s government.
It likewise commented that it would enter into "bilateral swap agreements" with SAARC central banks that want to avail the facility.
"Under the framework for 2024-27, a separate (a new provision) INR swap window has been introduced with various concessions for swap support in Indian rupee. The total corpus of the Indian rupee (INR) support is 250 billion INR ($2.9 billion approx). The RBI will continue to offer swap arrangement in US dollar (USD) and euro under a separate US dollar/euro swap window with an overall corpus of $2 billion," the statement reads.
The SAARC is a Kathmandu-headquartered grouping comprising Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
The statement noted that the SAARC "Currency Swap Facility" first came into operation in November 2012 to provide a "backstop line of funding for short-term foreign exchange liquidity requirements or balance of payment crises of the SAARC countries till longer term arrangements" were made.
The functioning of the SAARC grouping has largely been stalled since the last summit was held in Kathmandu in 2014. The 19th SAARC Summit, scheduled to take place in Islamabad in November 2016, had to be called off in the wake of a deadly terrorist attack at an Indian military facility in Uri in Jammu and Kashmir in September 2016.