Japan and India, on Monday, signed a Bilateral Swap Agreement (BSA) which enables both countries to swap their local currencies, that is, either Japanese yen or Indian rupee against the U.S. dollar for an amount up to $15 billion.

The BSA would be effective for a three-year period.

“The Bank of Japan (BOJ), acting as the agent for the Minister of Finance of Japan, and the Reserve Bank of India (RBI) concluded a Bilateral Swap Arrangement (BSA) between Japan and India,” said the RBI in a release here.

The BSA was signed by Governor Masaaki Shirakawa of the BOJ and Governor D. Subbarao of the RBI and become effective as of December 4, 2012, the RBI added.

In the past, both countries had a similar arrangement for an amount up to $3 billion for three years from June 2008 to June 2011.

“The arrangement aims at addressing short-term liquidity difficulties and supplementing the existing international financial arrangements, as one of the efforts in strengthening mutual cooperation between Japan and India,” the RBI added.

The BSA will be activated when an IMF-support program already exists or is expected to be established in the near future. Nevertheless, up to 20 percent of the maximum amount of drawing could be disbursed without an IMF-support program.

“This enhancement of the BSA will further strengthen economic and financial cooperation between the two countries and accordingly contribute to ensuring financial market stability,” the RBI said.

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