Q. Consider the following statements:
1.A currency swap agreement is a method for governments to avoid currency devaluation.
2.The South Asian Association for Regional Cooperation (SAARC) Currency Swap Framework allows the Reserve Bank of India (RBI) to enter into bilateral swap agreements with central banks of SAARC nations.
Which of the statement(s) given above is/are correct?
Answer: B
Notes:
Explanation –
Statement 1 is incorrect. Currency swaps are primarily used to manage foreign exchange liquidity and hedge against currency risks. They allow countries or companies to access foreign currency at favorable terms.
Statement 2 is correct. The SAARC Currency Swap Framework enables the RBI to establish bilateral swap agreements with central banks of SAARC member countries to provide short-term foreign exchange liquidity support.
Source: The Hindu
