India Extends ₹30 Billion Currency Swap for Maldives

#GS-2 #Current Events #International #Economy #Banking #India and its Neighbourhood #SAARC Currency Swap Framework #MAHASAGAR vision

Key takeaways

India agreed to roll over the first ₹30 billion drawdown under the bilateral currency swap arrangement with the Maldives.
The SAARC Currency Swap Framework (2024-27) offers an INR Swap Window of ₹25,000 crore and a US$2 billion window for foreign currency.
Since 2012, the RBI has extended over US$1.1 billion in currency swap assistance to the Maldives.
India previously supported the Maldives through Treasury bonds worth US$350 million and absorbed US$42.8 million in interest costs.

India accepted the request from the Maldives to roll over the first ₹30 billion drawdown under their bilateral currency swap agreement, strengthening the Neighbourhood First Policy.

A currency swap facility lets two central banks trade their currencies temporarily and reverse the trade later to solve balance of payments problems and handle foreign exchange crunches.

Under the SAARC Currency Swap Framework (2024-27), the Reserve Bank of India (RBI) provides swap facilities to seven other SAARC nations through bilateral pacts.
This framework sets up two special funding channels: an INR Swap Window worth ₹25,000 crore and a separate US Dollar or Euro window worth US$2 billion.

Ever since the SAARC framework began in 2012, the RBI has extended more than US$1.1 billion in total currency swap aid to the Maldives.

The RBI and the Maldives Monetary Authority (MMA) signed their bilateral currency agreement in October 2024.
The deal allows the Maldives to access US$400 million through the foreign currency channel and ₹30 billion through the Indian rupee window at cheaper rates.

India offered further financial backing by subscribing to two Maldivian Treasury bonds worth US$250 million and US$100 million.
The Maldives also cleared three Treasury bills worth US$150 million, while India paid US$42.8 million to cover the interest costs.

Extending this facility helps steady the economy of the Maldives, builds closer bilateral ties, and reinforces India's MAHASAGAR vision.