India Reserve Bank signs special Currency Swap Agreement with Central Bank of Sri Lanka

Mumbai: The Reserve Bank of India (RBI) yesterday signed a Special Currency Swap Agreement with the Central Bank of Sri Lanka, the RBI said in a press release.

Under the arrangement, the Central Bank of Sri Lanka can draw up to $ 1.1 billion for a maximum period of six months. This special arrangement is in addition to the existing Framework on Currency Swap Arrangement for the SAARC Member Countries.

During Indian Prime Minister Narendra Modi’s visit to Sri Lanka in March this year, the RBI and the Central Bank agreed to enter into the Currency Swap Agreement.

The Reserve Bank of India recalled that on 25 March, it had signed a Currency Swap Agreement with the Central Bank of Sri Lanka for $ 400 million under the existing SAARC Currency Swap Framework within the overall limit of $ 2 billion.

The swap arrangements are intended to provide a backstop line of funding for the SAARC member countries to meet any balance of payments and liquidity crises till longer term arrangements are made or if there is need for short-term liquidity due to stressed market conditions.

The proposal to extend the additional currency swap facility of $ 1.1 billion for a limited period was decided by India’s Union Government in April 2015 based on the recommendation of the Reserve Bank of India for mitigating the possible currency volatility in the spirit of strengthening India’s bilateral relations and economic ties with Sri Lanka, the release said.