The Reserve Bank of India (RBI) on Thursday signed a SAARC currency swap agreement worth $100 million with the Royal Monetary Authority of Bhutan (RMBA).
The RBI said under the arrangement, the Bhutanese authority can make drawals of US dollar, euro or Indian rupee in multiple tranches up to a maximum of $100 million or its equivalent.
“This is expected to further economic co-operation between the two countries,” the central bank pointed out adding that the agreement is valid for a period of three years from the date of signing.
The RBI stated that with the concurrence of the government, it was decided to extend the SAARC currency swap arrangement for two more years till November 2017.
Under this arrangement, the RBI offers an aggregate amount of $2 billion both in foreign currency (dollar and euro) and the rupee to SAARC member countries— Afghanistan, Bangladesh, Bhutan, the Maldives, Nepal, Pakistan and Sri Lanka.
The swap arrangement is intended to provide a backstop line of funding for the SAARC member countries to meet any balance of payments and liquidity mismatches till longer term arrangements are made or if there is need for short-term liquidity due to market turbulence.
The arrangement will further financial stability in the region, RBI said.