India signs $750-mn currency swap deal with forex-starved Maldives

Sub: IR

Sec: Places in news

Context:

India signed a $750 million currency swap agreement with the Maldives to help the island nation tide over its current foreign currency crunch.

Details:

India is set to extend financial assistance to the Maldives, offering $400 million through the US Dollar/Euro Swap Window.
Additionally, ₹30 billion (about $357 million) will be provided under the INR Swap Window.
The arrangement was signed between the Reserve Bank of India and the Maldives Monetary Authority under the SAARC Currency Swap Framework and is available until 2027.

What is currency swap?

Currency swaps are agreements between two parties to exchange one currency for another at a preset rate over a given period.
The main purpose of currency swaps is to avoid turbulence and other risks in the foreign exchange market and exchange rate.

SAARC Currency Swap Framework:

The SAARC Currency Swap Framework was established to provide short-term liquidity support to SAARC member countries.
The primary purpose of this facility is to address balance of payment crises and enhance financial stability among member nations.
Launched in 2012 and administered by the Reserve Bank of India (RBI), the facility includes all SAARC members.
This framework allows member countries to access swap arrangements in US Dollars, Euros, or Indian Rupees, depending on their needs. The framework provides certain concessions for swaps in Indian rupee.

Other agreements:

Maritime and Economic Security:

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