Hoping to stabilize the rupee, India has agreed to a $75 billion currency swap with Japan, according to reports on Monday (Oct. 29).
“The deal will help the two countries to swap their currencies for U.S. dollars to stabilize the rupee, which has witnessed the steepest fall in recent years,” according to a report from Bloomberg Quint. The rupee has recently sunk to record lows.
The move comes as interest rates increase in the United States, which, as Bloomberg noted, “has led to the strengthening of the greenback against other currencies, and flight of capital from emerging economies.” According to reports, the value of this currency swap is 50 percent higher than the last such deal between the two countries.
The deal will also enable “India to tap foreign capital as and when the need arises, and help to bring down the cost of funds for Indian companies while accessing the foreign capital market.”
News of the swap comes amid proposed and actual changes to payments in India, where authorities are trying to promote more use of digital over cash — an effort that has so far brought mixed and disappointing results. Among other developments is a push by the Reserve Bank of India to have its governor oversee payment regulation.
That recent news comes as the bank declines to back down on a requirement that global payments companies store data locally. As such, WhatsApp, Facebook’s messaging app that is trying to make inroads in the digital payments market in India, has created a system to store payment data locally in India.
The move to launch a payment app in India makes sense, given that Credit Suisse predicts it will be a $1 trillion market by 2023.
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