India to set up ‘foreign exchange swap fund’ to help boost economy

India will set up a foreign exchange swap funds (FETS) to provide relief to its financial sector after a prolonged global financial crisis, a finance ministry official said on Thursday.

The foreign exchange fund (FET) is likely to be a key plank of the government’s efforts to boost growth and jobs as the economy has been struggling in recent months, the official said.

The finance ministry has been in talks with global financial institutions to help fund the FETS, he added.FETS are a new type of bank account that allow banks to lend out money on an extended term to foreign investors.

The FETS provide a solution for the country’s banking sector to provide liquidity to foreign and domestic investors.

The government is expected to announce a list of the banks that have registered with the ministry for the FET next week, which is likely soon after the close of the bank season.

The official did not elaborate.

The Reserve Bank of India (RBI) and the Finance Ministry have been discussing ways to boost the financial sector during the first week of the new financial year, he said.

While the RBI will work with the government to establish a centralised foreign exchange exchange swap market, RBI Governor Raghuram Rajan will also be the central banker for the government, the finance ministry said in a statement.

The RBI will be responsible for setting the parameters for the centralised swap market that will be managed by the central bank and will be a mechanism for the establishment of an international standard for the settlement of foreign exchange transactions.