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Delhi approves $75 billion currency swap deal with Japan
January 12, 2019
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NEW DELHI: The Union Cabinet has approved a $75 billion currency swap deal between India and Japan to assist each other “in times of difficulty”. It also granted setting up of an advanced single window to boost bilateral investments.

Approving the proposed agreement for Bilateral Swap Arrangement (BSA) between India and Japan, the Cabinet authorised the Reserve Bank of India (RBI) to sign the deal with the Bank of Japan for a maximum amount of $75 billion.

“The swap arrangement is an agreement between India and Japan to essentially exchange and re-exchange a maximum amount of $75 billion for domestic currency, for the purpose of maintaining an appropriate level of balance of payments for meeting short-term deficiency in foreign exchange,” the Finance Ministry said in a statement.

The objective of a currency swap is to hedge exposure to exchange rate risks as at the end of the deal the local currencies are again swapped using the same exchange rate. It also helps in saving the cost of borrowing a foreign currency.

“The BSA is a very good example of mutual cooperation between India and Japan for strategic objective of assisting each other in times of difficulty and for restoring international confidence. This facility will enable the agreed amount of capital being available to India on tap for use.”

“Also, with this arrangement in place, prospects of Indian companies would improve in tapping foreign capital as there would be greater confidence in the stability of the country’s exchange rate.”

Indo-Asian News Service

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