Main Note - [Bilateral, Multilateral Swaps, LoC, Liquidity Arrangements](Bilateral,%20Multilateral%20Swaps,%20LoC,%20Liquidity%20Arrangements.md) 1. 2007 - the Reserve Bank was engaged in negotiation with the Bank of Japan for an arrangement of a bilateral currency swap. 1. Deputy Governor Shyamala Gopinath and Sanjay Krishna, Joint Secretary at the Ministry of Finance, were the main negotiators from the Indian side, while the Japanese team was led by Naoyuki Shinohara, Director-General, International Bureau, from the Ministry of Finance. [^1] 2. February 13, 2007 - The first meeting initiated discussions on the modalities of the swap arrangement. 3. [June 30, 2008](RBI_Press%20Release_080630_Signing%20of%20the%20Bilateral%20Swap%20Arrangement%20between%20Japan%20and%20India_RBI.pdf) - After several rounds of discussion, a bilateral swap arrangement (BSA) was finalised. The BSA was signed by Governor Masaaki Shirakawa of the BOJ and Governor Yaga Venugopal Reddy of the RBI in Basel, Switzerland and became effective as of June 29, 2008 4. The BSA enabled both countries to swap their local currencies (i.e., either Japanese yen or Indian rupee) against US dollar, for an amount up to USD 3 billion, to essentially (help India) tide over temporary balance of payments problems. 5. The arrangement aimed 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. 1. The term of the agreement was three years from the date of signing, renewable by the consent of both the parties. 2. **In the history of the Reserve Bank, this was the first swap arrangement of its kind.** RBI was authorised to undertake swap transaction under the RBI Act as the transaction could be viewed as a derivative contract within the meaning of the Act. [^1] 1. The RBI Act does allow RBI to undertake currency swaps. The Legal Department confirmed that the transaction could be viewed as a derivative contract within the meaning of the Act. 6. Terms of the Swap - Apart from conditions that commonly applied to such agreements, there were two important conditions governing the Indo-Japan currency swap agreement. 1. As long as the agreement was in effect, the borrower should have biannual consultations with the lender on economic and financial conditions, based on the information and data supplied to the latter in the specified format on various economic parameters. 2. As long as any monetary obligation under this agreement remained outstanding, the borrower would also not impose any controls on capital outflows. 3. The tenure of the swap was three months, which could be renewed seven times for three months each, meaning the total life of a drawal would be two years. 4. The applicable interest rate was a three-month London Interbank Offered Rate (LIBOR) plus 150 basis points (bps) for the first drawal, the tenure of which was ninety days. Thereafter, starting with the second renewal, the premium added to the LIBOR would increase by 50 bps for every two renewals, provided that such premium shall never exceed 300 bps. There was also a clause of ‘late interest’ on delayed repayment. 5. The interest and late interest would be computed from the original maturity date of the relevant swap transaction and every one month thereafter. 7. The arrangements has been renewed several times since 2008, and is effective as on Oct-2025. 8. ==A short note on [Currency Swaps](Bilateral,%20Multilateral%20Swaps,%20LoC,%20Liquidity%20Arrangements.md#Currency%20Swaps). They are different from [Forex Swaps](Forex%20Swaps.md).=== 9. [Mar 02, 2026](RBI_Press%20Release_20260302_Renewal%20of%20the%20Bilateral%20Swap%20Arrangement%20between%20Japan%20and%20India.pdf) - Renewal of the Bilateral Swap Arrangement between Japan and India was announced. As of then, the size is 75 billion US Dollars. 10. No withdrawals have been made under the agreement by either India or Japan. >Quick Fact - the Bilateral Swap Arrangements (BSAs) entered into by China with EMEs does not involve dollar. # Related 1. [[Bilateral, Multilateral Swaps, LoC, Liquidity Arrangements]] 2. [[Internationalisation of INR OPEN]] 3. [[SAARC Currency Swap Arrangement]] # References 1. Ajesh Palayi. (2024, May 21). *Currency Swaps of the Reserve Bank of India: Role in the GFSN and Fostering International Financial Cooperation.* RBI's Monthly Bulletin-May 2024. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=22589) | [pdf](RBI_Article_202405_Currency%20Swaps%20of%20the%20Reserve%20Bank%20of%20India_Ajesh%20Palayi.pdf) 2. RBI. (2008, June 30). Signing of the Bilateral Swap Arrangement between Japan and India. [pdf](RBI_Press%20Release_080630_Signing%20of%20the%20Bilateral%20Swap%20Arrangement%20between%20Japan%20and%20India_RBI.pdf) 3. ==RBI. ([Dec 19, 2022](RBI_Press%20Release_20221219_RBI%20Releases%20Fifth%20Volume%20of%20Reserve%20Bank%20History%20(1997-2008).pdf)). History of The Reserve Bank of India (1997-2008) - Volume V. [pdf](RBI_History%20of%20The%20Reserve%20Bank%20of%20India%20(1997-2008)_Volume%20V.pdf#page=198&selection=27,0,27,54)== [^1]: RBI. ([Dec 19, 2022](RBI_Press%20Release_20221219_RBI%20Releases%20Fifth%20Volume%20of%20Reserve%20Bank%20History%20(1997-2008).pdf)). History of The Reserve Bank of India (1997-2008) - Volume V. [Link](RBI_History%20of%20The%20Reserve%20Bank%20of%20India%20(1997-2008)_Volume%20V.pdf#page=198&selection=27,0,27,54)