Cabinet clears amendment to currency swap framework for SAARC countriestext_fields
New Delhi: The Union Cabinet on Wednesday gave its ex-post facto approval for amendment to the "Framework on Currency Swap Arrangement for SAARC Member Countries" to incorporate a 'standby swap' amounting to $400 million.
The standby swap was operated within the overall size of the facility which amounts to $2 billion.
In an official statement, the government said that due to heightened financial risk and volatility in global economy, short-term swap requirements of SAARC countries could be higher than the agreed lines and the amendment builds in flexibility with respect to modalities of its operation, such as period of swap and roll over.
"The incorporation of 'standby swap' within the approved SAARC Swap Framework would provide necessary flexibility to the framework and would enable India to provide a prompt response to the current request from SAARC member countries for availing the swap amount exceeding the present limit prescribed under the SAARC Swap Framework," it said.
The Cabinet gave its approval after due consideration of conditions of requesting SAARC member countries and domestic requirements of India, it said.
It had approved the framework on March 1, 2012 with the intention to provide a line of funding for short term foreign exchange requirements or to meet balance of payments crises till longer term arrangements were made or the issue resolved in the short-term itself.
Under the facility, RBI offers swaps of varying sizes to each SAARC member country depending on their two months import requirement and not exceeding $2 billion in total. The swap amount for each country has been defined, subject to a floor of $100 million and a maximum of $400 million.