Japan and India have renewed the Bilateral Swap Arrangement (BSA) the size of which is up to USD 75 billion. The BSA is a two-way arrangement where both authorities can swap their local currencies in exchange for the US Dollar. The interest rate charged in this case is fixed at the time of signing the agreement and hence it reduces the risk caused due to fluctuations in the exchange rate. The actual Bilateral Swap Arrangement (BSA) was signed between the Bank of Japan and the Reserve Bank of India in 2018.
What does BSA between India and Japan mean?
- It means that Japan and India can borrow money from each other in either their currency i.e Indian Rupee or Japanese Yen or US Dollar. This can be further explained as mentioned below:
- When India wants to borrow money from Japan it can borrow in US Dollars or Japanese Yen up to the limit of $75 billion.
- When Japan wants to borrow money from India it can borrow in US Dollars or Indian Rupees up to the limit of $75 billion.
- The countries will pay interest on the amount actually borrowed at an interest rate fixed at the time of borrowing the money.
Important takeaways for all competitive exams:
- Japan Capital: Tokyo;
- Japan Currency: Japanese Yen;
- Japan Emperor: Naruhito;
- Japan Prime minister: Fumio Kishida.