India-Japan Bilateral Swap Arrangement (BSA)

Context

India has renewed its Bilateral Swap Arrangement (BSA) with Japan, effective from 28 February 2026.

What is the Bilateral Swap Arrangement (BSA)?

1. The Bilateral Swap Arrangement is a two-way currency swap agreement between the central banks of two countries.
2. Under this mechanism each country can exchange its local currency with the other in return for US dollars when required.
3. The exchange takes place under pre-decided conditions and timeframes.

Size of the India–Japan BSA

1. The current India–Japan arrangement remains unchanged at 75 billion US dollars.
2. This makes it one of the largest bilateral currency swap arrangements in the world.
3. It demonstrates the deep financial trust and economic partnership between India and Japan.

How the Swap Arrangement Helps

The BSA provides several benefits:

1. Ensures access to foreign exchange liquidity during financial crises
2. Helps stabilise currency markets
3. Reduces pressure on foreign exchange reserves
4. Strengthens investor confidence

Other Currency Swap Arrangements by India

1. India has also established other currency swap agreements to strengthen regional financial cooperation.
2. Examples include:
   1. SAARC Currency Swap Arrangement (2024–27) – a regional financial support mechanism among South Asian countries
   2. India–UAE Currency Swap Arrangement
   3. India–Sri Lanka Currency Swap Arrangement

FAQs

Q1. What is a Bilateral Swap Arrangement (BSA)? 

A BSA is a two-way currency swap agreement between the central banks of two countries. It allows each country to exchange its local currency with the other in return for US dollars under pre-decided conditions and timeframes, providing liquidity support during financial stress.

Q2. What is the size of the India–Japan BSA? 

The current arrangement is valued at USD 75 billion, making it one of the largest bilateral currency swap agreements globally.

Q3. Why is the India–Japan BSA significant? 

It demonstrates deep financial trust and economic partnership between India and Japan. It also strengthens India’s ability to manage external shocks and currency volatility.

Q4. What other currency swap arrangements has India established other than India-Japan BSA?

1. SAARC Currency Swap Arrangement (2024–27)
2. India–UAE Currency Swap Arrangement
3. India–Sri Lanka Currency Swap Arrangement