Current Affairs

Currency Swap Agreements: India – Sri Lanka

  • A currency swap is a transaction in which two parties exchange an equivalent amount of money with each other but in different currencies. 
  • The parties are essentially loaning each other money and will repay the amounts at a specified date and exchange rate. 
  • After this pact, countries don’t require dollars to trade between themselves.
  • It supports the national currencies against the dollar.

The Reserve Bank of India has agreed to a $400 million currency swap facility for Sri Lanka till November 2022.

  • The RBI’s action follows a recent bilateral ‘technical discussion’ on rescheduling Colombo’s outstanding debt repayment to India which stands at approximately $960 million.
  • Earlier, the Sri Lankan Prime Minister had sought a loan moratorium, during his visit to New Delhi