The Bank of Japan and the Reserve Bank of India signed a Bilateral Swap Arrangement (BSA) with effect from yesterday, which will enable both countries to swap their local currencies against US dollar for up to $75 billion.
The BSA will help maintain an appropriate level of balance of payments or short-term liquidity.
India has comfortable level of foreign exchange reserves at present and “the BSA provides India flexibility to use these reserves if at any point of time, in its judgment, there is a need to use the resources available under BSA,” the Indian finance ministry said in a statement.
A part of the BSA can be accessed at the discretion of India, it said, adding “this financial cooperation would further enhance the strong economic ties between India and Japan.
The previous BSA had provided for $50 billion.
The agreement for the BSA has been entered into between Reserve Bank of India and Bank of Japan.
The BSA was negotiated between India and Japan during the visit of Indian Prime Minister Narendra Modi to Tokyo on October 29 last year.
“The agreement for the BSA has become effective from today i.e. 28.02.2019. India can access the agreed amount of $75 billion for its domestic currency for the purpose of maintaining an appropriate level of balance of payments or short-term liquidity,” according to the statement.
“India welcomes the BSA effectiveness and expresses its gratitude to Japan for agreeing to enter into this arrangement,” it said, adding that “this is in the spirit of strong partnership and carries out its strategic partnership further”.