India and Japan today entered into a currency swap agreement for up to $15 billion, which would enable both countries to swap their local currencies either Japanese yen or Indian rupee against US dollar.
The Bank of Japan (BOJ), acting as the agent for the minister of finance of Japan, and the Reserve Bank of India (RBI) concluded the bilateral swap arrangement (BSA) between the two countries.
The currency swap arrangement signed by BoJ governor Masaaki Shirakawa and RBI governor D Subbarao becomes effective as of 4 December 2012 and would be valid for a three-year period.
The arrangement aims at addressing short-term liquidity difficulties and supplementing the existing international financial arrangements, as one of the efforts in strengthening mutual cooperation between Japan and India.
The BSA will be activated when an IMF-support programme already exists or is expected to be established in the near future. Nevertheless, up to 20 per cent of the maximum amount of drawing could be disbursed without an IMF-support programme, RBI said in a release.
The two countries had a similar arrangement for an amount up to $3 billion for a period of 3 years from June 2008 to June 2011.
This enhancement of the BSA will further strengthen economic and financial cooperation between the two countries and accordingly contribute to ensuring financial market stability, the release added.