Context
The Reserve Bank of India has agreed to provide $400 million currency swap facility for Sri Lanka till November 2022. Srilankan government is undergoing through worst kind of debt and financial crisis.
Currency Swap Arrangement (CSA)
An arrangement between two friendly countries to do trade in their own local currencies. That means Sri Lanka can make payment to India for import from India in Srilankan currency, and vice versa.
It means payment between the two counties does not involve third country currency i-e- US dollar etc. Further, the transactions will be done at pre-determined exchange rate.
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