India, Japan to enhance currency swap arrangement to $ 50bn

India and Japan have decided to more than triple their bilateral currency swap arrangement to USD 50 billion, a development that is likely to bring stability in financial markets in the country.

"Indian and Japanese governments have decided to expand their bilateral currency swap arrangement from USD 15 to USD 50 billion. It is expected that this will contribute to the stability of financial markets," the Reserve Bank said in a statement.

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The central government and the RBI will discuss and finalise the terms of the enhancement of the swap arrangement with their Japanese counterpart. Earlier in December 2012, the two countries had entered into a bilateral currency swap arrangement for USD 15 billion.

"This arrangement aimed at addressing possible short-term liquidity mismatches and supplementing existing international financial  arrangements, is part of the effort to strengthen mutual cooperation between Japan and India," RBI said.

Earlier, the two countries had a similar arrangement for USD 3 billion for three years from June 2008.  The rupee had almost touched the low of 69 against the US dollar last month on the back of huge capital outflows and high current account deficit.

However, the rupee has strengthened and today closed at at 65.24 versus US dollar, up 77 paise or 1.17 per cent over Thursday.