RBI and RMA signed an agreement to extend the validity of the Bilateral Currency Swap Agreement signed on January 31, 2020 and also to provide additional swap support to Bhutan, yesterday.
This agreement enables the RMA to avail an additional swap amount of up to USD 200M or equivalent in Nu 16.57B from the RBI.
This support of USD 200M INR equivalent is in addition to the existing currency swap support of USD 200M INR equivalent extended by the RBI.
This agreement was facilitated by the government of India at the request of the government of Bhutan. The agreement will be valid till June 30, 2023.
The swap agreement between the RBI and the RMA is intended to provide a backstop line of funding for the RMA for short-term foreign exchange liquidity requirements or to meet any balance of payments and liquidity crises. The INR swap arrangements have benefited Bhutan in managing the INR liquidity. This facility has also helped to promote trade and investment between the two countries.
In the past, the RBI and the RMA signed bilateral currency swap agreements in 2013, 2016, 2019, and 2020. Under the SAARC Currency Swap Agreement, the RBI offers an agreement amount of USD 2B both in foreign currency, USD, Euro and in INR to the requesting countries.
Additionally, India is currently providing two Standby Credit Facilities (SCF) to Bhutan, of Nu 3B and Nu 4B, whose settlement period was recently extended by another 60 months with a reduced interest rate of 2.5 percent with effect from July 1, 2022. The SCFs also serve to promote bilateral trade by facilitating payments within India and meeting INR requirements in Bhutan.
India and Bhutan enjoy exemplary ties of friendship and close cooperation based on trust and mutual understanding across all sectors, including financial cooperation as brought out above.
The official from RMA said that this will not be exchanged with any other currency but it will help us in terms of building our reserve temporarily.
RBI signed the first Currency Swap Agreement with the RMA up to USD 100mn to further economic cooperation between the two countries, in New Delhi, India in 2013.
During the Prime Minister of India, Narendra Modi’s visit to Bhutan in 2019, at the request of the RMA through the government, India agreed to double this to USD 200M under the Standby Currency Swap Arrangement.