RBI and Bank of Japan sign Bilateral Swap Arrangement

• Reserve Bank of India and Bank of Japan have signed a Bilateral Swap Arrangement (BSA).
• The swap involves US Dollar besides Japanese Yen and Indian Rupee.
• As part of the agreement, the Bank of Japan (Japanese central bank) will accept rupees and give dollars to the Reserve Bank of India (RBI) and, similarly, the RBI will take the yen and give dollars to the Bank of Japan to stabilize each other’s currency.

Benefits of Bilateral Swap Agreement

Supplements Dollar-demand: In recent times, the rupee has been falling against the dollar because of its widening current account deficit (the difference ....