The Indian government has formed a $2 billion fund to assist member countries of the South Asian Association for Regional Cooperation (SAARC) to tackle balance of payments crisis.
Bangladesh Bank Governor Atiur Rahman said at a programme of Economic Reporters Forum (ERF) on Sunday that Bangladesh will be able to take loans worth above $400 million through swap arrangement.
India recently finalised the initiative at a meeting of SAARC Finance Governors' in Nepal. The Reserve Bank of India will fund the initiative.
Under the swap arrangement, each country will be given loans in three instalments according to their demand. The interest rates for the first two instalments would be two percent more than London Interbank Offered Rate (LIBOR). The third instalment would cost two and a half percent more.
The initiative for loan within South Asian Countries came up for discussion in January this year due to the hike in dollar prices and liquidity crisis. Following the fifth conference of SAARC Finance Ministers in Dhaka, Finance Minister Abul Maal Abdul Muhith said that India suggested a swap arrangement between SAARC countries and that it would soon be implemented.
India will offer swap arrangement of $2 billion both in foreign currency and Indian rupee.
RBI said the swap arrangement will be entirely funded by India and it will be offered in US dollar, euro and Indian rupee against the domestic currency or domestic currency denominated government securities of the requesting country.
The swap arrangement is intended to provide a back stop line of funding for the SAARC member countries to meet any balance of payments and liquidity crises, till longer term arrangements are made, RBI said.
It would also help if there is a need for short-term liquidity due to market turbulence, the Indian central bank added.
With the launch of this facility, member countries can now approach Reserve Bank of India for availing of the facility.
The swap amount available to various member central banks has been arrived based on two months import cover subject to a floor of $100 million and a maximum of $400 million per country, RBI said.
The requesting member countries will be able to make drawals of US dollar, euro or Indian rupee in multiple tranches. Each drawal of three months tenor and can be rolled over twice.
The first rollover will attract normal interest rate which is equal to LIBOR (for three months) plus 200 basis points. However, the second rollover will attract 50 basis points more than the normal interest rate.
SAARC countries will have to enter a bilateral swap agreement with India which will need final approval from the Indian government to avail themselves of the facility.
Bangladesh Bank Governor Atiur Rahman said at a programme of Economic Reporters Forum (ERF) on Sunday that Bangladesh will be able to take loans worth above $400 million through swap arrangement.
India recently finalised the initiative at a meeting of SAARC Finance Governors' in Nepal. The Reserve Bank of India will fund the initiative.
Under the swap arrangement, each country will be given loans in three instalments according to their demand. The interest rates for the first two instalments would be two percent more than London Interbank Offered Rate (LIBOR). The third instalment would cost two and a half percent more.
The initiative for loan within South Asian Countries came up for discussion in January this year due to the hike in dollar prices and liquidity crisis. Following the fifth conference of SAARC Finance Ministers in Dhaka, Finance Minister Abul Maal Abdul Muhith said that India suggested a swap arrangement between SAARC countries and that it would soon be implemented.
India will offer swap arrangement of $2 billion both in foreign currency and Indian rupee.
RBI said the swap arrangement will be entirely funded by India and it will be offered in US dollar, euro and Indian rupee against the domestic currency or domestic currency denominated government securities of the requesting country.
The swap arrangement is intended to provide a back stop line of funding for the SAARC member countries to meet any balance of payments and liquidity crises, till longer term arrangements are made, RBI said.
It would also help if there is a need for short-term liquidity due to market turbulence, the Indian central bank added.
With the launch of this facility, member countries can now approach Reserve Bank of India for availing of the facility.
The swap amount available to various member central banks has been arrived based on two months import cover subject to a floor of $100 million and a maximum of $400 million per country, RBI said.
The requesting member countries will be able to make drawals of US dollar, euro or Indian rupee in multiple tranches. Each drawal of three months tenor and can be rolled over twice.
The first rollover will attract normal interest rate which is equal to LIBOR (for three months) plus 200 basis points. However, the second rollover will attract 50 basis points more than the normal interest rate.
SAARC countries will have to enter a bilateral swap agreement with India which will need final approval from the Indian government to avail themselves of the facility.
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