India and Japan today signed a currency swap agreement for up to USD 15 billion to address short-term liquidity problems.
The bilateral swap arrangement (BSA) between the Reserve Bank of India and the Bank of Japan enables both countries to swap their local currencies either Japanese yen or Indian rupee against US dollar for an amount up to USD 15 billion.
"The arrangement aims at addressing short-term liquidity difficulties and supplementing the existing international financial arrangements, as one of the efforts in strengthening mutual cooperation between Japan and India," RBI said in a statement.
The arrangement to be effective from December 4, 2012 would be for a three year period.
Earlier, both countries had a similar arrangement for an amount of up to USD 3 billion for a period of 3 years between June 2008 and June 2011.
"This enhancement of the BSA will further strengthen economic and financial cooperation between the two countries and accordingly contribute to ensuring financial market stability," the RBI said.
The BSA is activated when an IMF-support programme already exists or is expected to be established in the near future.
Nevertheless, up to 20 per cent of the maximum amount of drawing could be disbursed without an IMF-support programme, it added.
The arrangement was signed by RBI Governor D Subbarao and Bank of Japan Governor Masaaki Shirakawa.