India and Japan renew bilateral swap arrangement of $75 billion

India and Japan on Monday renewed their bilateral swap arrangements to the extent of $75 billion, a Reserve Bank of India (RBI) statement said. The Bank of Japan, acting as an agent for the Minister of Finance Japan, and the RBI signed the amendment and restatement agreement of the bilateral swap agreement (BSA), the statement read.

“Japan and India believe that the BSA, which aims to strengthen and complement other financial safety nets, will further deepen financial cooperation between the two countries and contribute to regional and global financial stability”, the RBI statement said.

Essentially, BSA is a two-way arrangement where both authorities can swap their local currencies in exchange for dollars. This means, India can acquire dollars from Japan in exchange for rupees. And, conversely, Japan can also seek dollars from India in exchange for yen

The BSA was negotiated between India and Japan during the Indian prime minister’s visit to Japan in 2018. Consequently, the swap arrangement was signed to the tune of $75 billion in October 2020, to bring greater stability to foreign exchange.