| India and Japan have expanded their bilateral 'Currency Swap Agreement' designed to help each other in the event of a FOREX crisis or a short-term liquidity crisis. Under this Agreement |
| 1. Bank of Japan will give dollars for rupees to the RBI |
| 2. Bank of Japan will give dollars to Indian Infrastructure companies for importing. |
| 3. RBI will take yen and give rupees to Bank of Japan |
| 4. When FOREX reserves deplete in India of Japan this agreement will become operative. Select the correct statements using the codes given below: |
A) 1 and 2 only
B) 2 and 3 only
C) 1 and 4 only
D) 3 and 4 only
Correct Answer: C
Solution :
[c] A currency swap (or a cross currency swap) is a foreign exchange derivative between two institutions to exchange the principal and/or interest payments of a loan in one currency for equivalent amounts, in net present value terms, in another currency.
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