New Delhi: The Reserve Bank of India’s SAARC currency swap facility for 2024-27 is set to internationalise the rupee, turning it into a truly global currency of exchange. The currency swap feature allows multiple parties to meet their foreign currency liquidity needs at a pre-determined rate to offset forex volatility.
All about SAARC currency swap arrangement
RBI devised the SAARC currency swap arrangement in order to help SAARC member nations meet their foreign currency needs. SAARC, or the South Asian Association for Regional Cooperation, is a grouping of South Asian countries, namely:
India
Bhutan
Bangladesh
Myanmar
Sri lanka
Maldives
Nepal
Afghanistan
Pakistan
First introduced in 2012, the SAARC currency swap arrangements help member nations address short-term, foreign currency liquidity needs or avoid a crisis of balance of payments in which they are short of funds to cover their imports.
What is ruppe internationalisation?
Rupee internationalisation is a conscious endeavour of the Indian government driven by the RBI to transform the Indian rupee into a global currency of trade. Efforts such as digital rupee apart from rupee-tradefacilitation via vostro accounts are aimed at making the Indian rupee a store of value like the hard currencies such as:
US dollar
Chinese renminbi
Japanese Yen
Australian dollar
Canadian dollar
The Euro
British pound sterling
Swiss franc
Under the 2024-27 SAARC currency swap arrangement, the RBI has extended a separate INR swap window. Rupee support to the tune of Rs 25,000 crore has been extended under the arrangement. The SAARC arrangement offers multi-currency swap provisions.
If a SAARC country seeks to secure US dollars for immediate consumption, it can ink a bilateral agreement with RBI and exchange its currency for the US dollar, the euro or even the Indian rupee at a pre-determined rate. Now SAARC countries can also exchange their currency for the Indian rupee, which may drive up the rupee’s demand and lead ot an increase in its exchange value.
Indian businesses based in SAARC countries are also likely to cut their cost of purchase by carrying out cross-border transactions in the rupee, instead of other foreign currencies.
SAARC currency swap arrangement: The Reserve Bank of India’s move to open a SAARC currency swap window will help in rupee internationalisation, making it a truly global currency. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
