RBI on Wednesday signed a $400 million currency swap agreement with the Central Bank of Sri Lanka for three years that will allow the island nation to draw the amount in dollars or euros in multiple tranches.

"The Central Bank of Sri Lanka can make drawals of US Dollar or Euro in multiple tranches up to a maximum of USD 400 million or its equivalent," RBI said in a statement.

The agreement, which will be valid for three years, is expected to further economic co-operation between the two countries, it added.

The arrangement will also further financial stability in the region, RBI said.

The swap arrangement is intended to provide a backstop line of funding for the SAARC member countries to meet any balance of payments and liquidity crises till long-term arrangements are made.

In May 2012, Reserve Bank of India had announced in the SAARCFINANCE Governor's meeting, held in Nepal, that it would offer swap facilities aggregating $2 billion, both in foreign currency and rupee to SAARC member countries.

The facility is available to all South Asian Association for Regional Cooperation (SAARC) member countries. Besides India, other members of SAARC are: Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.
(PTI)