VVR - IAS Exam Preparation
Current Affairs:(Socio-Economic Issues)
Proposal to permit Reserve Bank of India to enter into Currency Swap Agreement with the central bank of Sri Lanka
- The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, today gave its ex-post-facto approval for entering into an agreement with the Central Bank of Sri Lanka for extending US$1.1 billion as a special /ad-hoc swap outside the Framework on Currency Swap Arrangement for SAARC Member Countries.
About the arrangement:
- India has a Framework on Currency Swap Arrangement for SAARC Member Countries since 2012. The facility is available to all SAARC member countries with a floor of US $100 million and ceiling of US $ 400 million within overall limit of US$ 2 billion and is valid till November 14, 2015.
- RBI in their letter dated February 18, 2015 has proposed to make available US$400 million to Sri Lanka under this Framework and the remaining US$1.1 billion as a special/ad-hoc swap facility outside the Framework, but with the same terms and conditions, for 6 months against the request of the Central Bank of Sri Lanka.
- This will help Sri Lanka in availing a safety net against the probable volatility of their currency and provide short-term liquidity that would contribute to Sri Lanka’s economic recovery. This will also strengthen India’s bilateral relations and economic ties with Sri Lanka.
Currency swap:
An agreement to swap a series of specified payment obligations denominated in one currency for a series of specified payment obligations denominated in a different currency. Usually fixed for fixed.