The Reserve Bank today signed a Bilateral Swap Arrangement with the Bank of Japan for swapping of the local currencies to address short-term liquidity problems.
"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," RBI said in a statement.
The BSA would enable both the countries to swap their local currencies (either Japanese yen or Indian rupee) against the US dollar for an amount of up to $15 billion.
In the past, both countries had a similar arrangement for an amount of up to $3 billion for a period of 3 years from June 2008 to June 2011, it said.
The BSA is activated when an IMF-support programme 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 programme, it added further.
"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 statement said.
The BSA shall be effective for a three-year period.
The BSA was signed by RBI governor D Subbarao and Bank of Japan governor Masaaki Shirakawa.