Japan and India renew $75 billion currency swap pact to strengthen financial cooperation

Japan and India have renewed their Bilateral Swap Arrangement (BSA), a move aimed at reinforcing financial stability and deepening economic cooperation between the two countries, as it battles a steep drop in the rupee’s value.

Effective February 28, 2026, the Bank of Japan and the Reserve Bank of India signed an updated agreement that allows both nations to exchange their local currencies for US dollars, maintaining the existing USD 75‑billion swap limit. Officials from both sides said the arrangement enhances their financial safety nets and supports broader regional and global economic stability.

RBI in a press release on March 2 said, "Japan and India renewed the Bilateral Swap Arrangement (BSA) effective from February 28, 2026. The Bank of Japan, acting as the agent for the Minister of Finance, Japan, and the Reserve Bank of India signed the third Amendment and Restatement Agreement of the BSA."

It further added that, "the BSA is a two-way arrangement where both authorities can swap their local currencies in exchange for the US Dollar. The size of the BSA remains unchanged, that is, up to 75 billion US Dollars. Japan and India believe that the BSA, which aims to strengthen and complement other financial safety nets, will further deepen financial cooperation between the two countries and contribute to regional and global financial stability"

What is Bilateral Swap Arrangement

A Bilateral Swap Arrangement (BSA) for currency is a formal agreement between two countries’ central banks that allows them to exchange (or “swap”) their local currencies for a major reserve currency, usually the US dollar, whenever needed. If either country faces short‑term pressure on its currency, such as sudden capital outflows, a sharp fall in exchange rate, or stress in global markets, it can draw dollars (or another agreed currency) from the partner country’s central bank. This provides immediate liquidity support and helps stabilise the financial system.

Unlike one‑way arrangements, a BSA allows both countries to request currency support from each other. So, each side can swap its own currency (e.g., rupees or yen) in exchange for dollars.