Cabinet approves RBI pact with Central Bank of Sri Lanka

NEW DELHI: Cabinet today gave ex-post-facto approval to RBI's agreement with the Central Bank of Sri Lanka for extending USD 1.1 billion as a special/ad-hoc currency swap, which will help the island nation to deal with currency volatility and promote trade.

This agreement will be outside the Framework on Currency Swap Arrangement for SAARC Member Countries, said an official statement after the meeting of the Cabinet chaired by Prime Minister Narendra Modi.

India has a Framework on Currency Swap Arrangement for SAARC Member countries since 2012.

The facility is available to all SAARC member countries with a floor of USD 100 million and ceiling of USD 400 million within overall limit of USD 2 billion and is valid till November 14, 2015.

RBI had proposed to make available USD 400 million to Sri Lanka under this Framework and the remaining USD 1.1 billion as a special/ad-hoc swap facility outside the Framework, but with the same terms and conditions, for six months against the request of the Central Bank of Sri Lanka.

"This will help Sri Lanka in availing a safety net against the probable volatility of their currency and provide short-term liquidity that would contribute to Sri Lanka's economic recovery. This will also strengthen India's bilateral relations and economic ties with Sri Lanka," the statement added.