India and Bhutan on Friday signed a currency swap agreement for up to $100 million to further economic co-operation between the two countries.

The currency swap arrangement was signed between the Reserve Bank of India (RBI) and the Royal Monetary Authority of Bhutan (RMAB).

It enables RMAB to make withdrawals of US dollar, Euro or rupee in multiple tranches up to a maximum of $100 million or its equivalent.

"The swap agreement is intended to provide a backstop line of funding for the SAARC member countries to meet any balance of payments and liquidity crisis till longer term arrangements are made or if there is need for short term liquidity due to market turbulence," RBI said in a statement.

The arrangement would be for a three-year period and would help bring financial stability in the region.

In May 2012, RBI had announced it would offer swap facilities aggregating $2 billion, both in foreign currency and Rupee, to SAARC member countries -- Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.