Themes: Balance of payments • Bank of Japan • Bilateral exchange agreement • Currency swap • RBI • Reserve Bank of India • Yen For Prelims and Main: importance, importance and impact of monetary swap. Themes: Bangladesh • Bhutan • Currency swap • Maldives • RBI • Reserve Bank of India • Rupee • SAARC • Srilanka • US dollar context: With the aim of strengthening financial stability and economic cooperation, the Reserve Bank of India has revised the framework of currency swap arrangements for Saarc countries until 2022. A foreign exchange swap has two types of transactions – a spot transaction and a futures transaction – that are executed simultaneously for the same amount and therefore balance each other. Foreign exchange transactions occur when both companies have a currency that the other needs. It avoids negative currency risk for both parties. Foreign exchange spot transactions are similar to foreign exchange transactions in the manner in which they are agreed; However, they are scheduled for a certain appointment in the very near future, normally in the same week. According to the agreements, both countries pay for import and export trade at exchange rates set in advance, without bringing a third-country currency such as the US dollar. It is an agreement between two friendly countries that have regular, substantial or growing exchanges to essentially integrate trade into their own local currencies, both paying for import and export trade at exchange rates set in advance, without bringing in third country currencies like the US dollar. . . .