Reserve Bank of India has signed a special currency swap agreement with the Central Bank of Sri Lanka (CBS). Under this agreement, Sri Lankan bank can draw up to 1.1 billion dollars for a maximum period of 6 months. It was signed with an intention to mitigate the possible currency volatility in the spirit of strengthening bilateral relations and economic ties of India with Sri Lanka. It should be noted that, this special arrangement was signed in addition to the existing Framework on Currency Swap Arrangement for the SAARC member countries. Earlier in March 2015, RBI had signed similar Currency Swap Agreement with Sri Lankan bank for 400 million dollars under the SAARC Currency Swap Framework within the overall limit of 2 billion dollars. SAARC Currency Swap Framework This Currency Swap Framework is signed between SAARC member countries. It seeks to provide a backstop line of funding to member countries in order to meet any balance of payments and liquidity crises. During the crisis, this fund will be provided till longer term arrangements are made or till the need for short-term liquidity due to stressed market conditions.
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