Currency Swap facility

• Integrity Education, Delhi
• 30, Jun 2021

Why in news: RBI currency swaps to boost Sri Lanka's reserves, says Governor of Central Bank

• A currency swap is a transaction in which two parties exchange an equivalent amount of money with each other but in different currencies. 
• Central banks and Governments engage in currency swaps with foreign counterparts to meet short term foreign exchange liquidity requirements or to ensure adequate foreign currency to avoid Balance of Payments (BOP) crisis till longer arrangements can be made.
• Considered to be a foreign exchange transaction, currency swaps are not required by law to be shown on a company's balance sheet

SAARC Currency swap framework

• The SAARC currency swap facility came into operation on 15th November, 2012.
• The swap drawals can be made in US dollar, euro or Indian rupee. The framework provides certain concessions for swap drawals in Indian rupee.
• The facility will be available to all SAARC member countries, subject to their signing the bilateral swap agreements