New Delhi: The Indian cabinet on Wednesday gave its ex-post facto approval for the amendments to the framework on currency swap arrangement for SAARC countries by incorporating a standby facility of $400 million.
The arrangement will enable India to provide prompt responses to the current request from SAARC member countries for availing the swap amount exceeding the present limit prescribed under the SAARC Swap Framework.The amendment aims to incorporate a ‘Standby Swap’ amounting to $400 million operated within the overall size of the facility of $2 billion and build in flexibility with respect to modalities of its operation.
Due to heightened financial risk and volatility in the global economy, short-term swap requirements of SAARC countries could be higher than the agreed lines.
The Indian cabinet led by Prime Minister Narendra Modi earlier approved the Framework on Currency Swap Arrangement for SAARC Member Countries on March 1, 2012 to provide a line of funding for short-term foreign exchange requirements or meeting balance of payments crises till longer-term arrangements are made.
Under the facility, the Reserve Bank of India offers swaps of varying sizes in USD, Euro or INR to each SAARC member country depending on their two months’ import requirement not exceeding $2 billion in total.
The swap amount for each country has been defined in the above facility, subject to a floor of $100 million and a maximum of $ 400 million. Each withdrawal will be for three months and up to a maximum of two rollovers.
Reserve Bank of India will negotiate the operational details bilaterally with the Central Banks of the SAARC countries availing the standby swap.