The Modi Cabinet in keeping with neighbourhood first policy on Wednesday approved amendments to the framework on currency swap arrangement for SAARC member countries by incorporating a stand-by facility of $ 400 million to assist countries like Sri Lanka and Maldives whose economies faced crisis by borrowing heavily from China.
The facility would enable India to provide a prompt response to the current request from SAARC member countries for availing the swap amount exceeding the present limit prescribed under the SAARC Swap Framework.
The Reserve Bank will negotiate the operational details bilaterally with the central banks of the SAARC countries availing the Standby Swap, an official statement said.
"The Union Cabinet, chaired by Prime Minister Narendra Modi has given ex-post facto approval for amendment to the 'Framework on Currency Swap Arrangement for SAARC Member Countries' to incorporate a 'Standby Swap' amounting to $ 400 million operated within the overall size of the Facility of $ 2 billion," the statement added.
An Indian Cabinet approved the Framework on Currency Swap Arrangement for SAARC Member Countries on March 1, 2012 with the intention to provide a line of funding for short term foreign exchange requirements or to meet balance of payments crises till longer term arrangements are made or the issue is resolved in the short-term itself.
Under the Facility, RBI offers swaps of varying sizes in US Dollars, Euro or Indian Rupee to each SAARC member country depending on their two months import requirement and 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 Drawal will be for three months tenor and upto maximum of two rollovers.
Source: economictimes.indiatimes.com