Current Affairs

Cabinet approves Currency Swap Agreement with Japan

The Union Cabinet has approved India's Currency Swap Agreement with Japan.
Cabinet approves Currency Swap Agreement with Japan
  • The $75-billion bilateral currency swap arrangement is a milestone in mutual economic cooperation and special strategic and global partnership between the two countries. 

What is a Currency Swap Agreement?

  • A Currency swap agreement is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, to give back the original amounts swapped.

How a Currency Swap Agreement can benefit a country, especially India?

  • The currency swap facilities make it easier for India to pay for its imports. This aids in addressing the challenge of depreciation in INR.
  • Since the Currency swap agreement involves trading in local currencies. Countries pay for imports and exports through their own currencies rather than involving a third country currency. This does away with the charges involved in multiple currency exchanges.
  • The currency swap makes it easier to improve liquidity conditions.
  • Currency swap agreements help in saving for a rainy day when the economy is not looking in good shape.
  • The swap agreements also contribute towards stabilising the country's balance of payments (BoP) position.
  • The agreement aids in improving the confidence in the Indian market.
  • Together with ensuring that the agreed amount of capital is available to India, it also brings down the cost of capital for Indian entities while accessing the foreign capital market.

One must know:

  • The Currency Swap Agreement was concluded between Prime Minister Narendra Modi and Japan's Prime Minister Shinzo Abe during the summit level meeting at Yamanashi, Japan.

Question:

Q. The Union Cabinet has approved India's Currency Swap Agreement with which country?
a. South Korea
b. China
c. Japan
d. Russia
Cabinet approves Currency Swap Agreement with Japan Cabinet approves Currency Swap Agreement with Japan Reviewed by Inderjeet Virdi on January 14, 2019 Rating: 5

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