Central banks of India, Japan sign swap pact

June 30th, 2008 - 8:36 pm ICT by IANS  

Mumbai, June 30 (IANS) With a view to overcome short-term liquidity problems and strengthen existing international financial arrangements, the central Reserve Bank of India (RBI) and Bank of Japan (BOJ) have signed a bilateral swap arrangement (BSA), a joint statement by the two Monday said. The BSA was signed by BOJ governor Masaaki Shirakawa and RBI governor Yaga Venugopal Reddy in Basel, Switzerland.

The BSA, enabling both countries to swap their currencies - the Japanese yen or the Indian rupee - against the US dollar up to $3 billion, came into effect Sunday (June 29).

“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 percent of the maximum amount of drawing could be disbursed without an IMF-support programme,” it was stated.

India and Japan will hold biannual consultations on economic and financial conditions of each country with the BSA in effect.

The arrangement has been described as “a milestone in mutual cooperation between Japan and India” and is expected to bring stability to the financial markets.

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