The Reserve Bank of India, in collaboration with the Government of India, has decided to implement a revised Framework on Currency Swap Arrangement for SAARC countries, effective from 2024 to 2027. But first let’s understand what is this SAARC currency swap facility.
The SAARC currency swap facility was first operationalised in November 2012 and is intended to provide a backstop line of funding for short-term foreign exchange liquidity requirements or balance of payments crises suffered by SAARC countries till longer-term arrangements are made. The facility is to provide swap support as an alternative source of funding for short-term foreign exchange liquidity requirements.
This Framework enables the Reserve Bank to enter into bilateral swap agreements with SAARC central banks that wish to utilize the swap facility. The SAARC Currency Swap Facility was originally introduced on November 15, 2012, to provide a contingency funding line for short-term foreign exchange liquidity needs or balance of payment crises until longer-term solutions are established.
For the 2024-27 period, a distinct INR Swap Window has been introduced, offering various concessions for swap support in Indian Rupees. The total corpus for Rupee support is ₹250 billion. Additionally, the RBI will maintain the US Dollar/Euro Swap Window with an overall corpus of US$ 2 billion, offering swap arrangements in both US dollars and euros. The Currency Swap Facility will be available to all SAARC member countries, contingent upon their signing the bilateral swap agreements.