India had entered into currency swap pacts with Japan for lesser amounts in the past.
India and Japan on Monday concluded a $75 billion bilateral currency swap agreement -- less than a week after Tokyo entered into a similar pact with Beijing for $30 billion -- a move aimed at improving confidence in the country's foreign exchange and capital markets.
The announcement was made after the annual summit meeting between Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe in Tokyo.
The currency swap pact would enable the two major Asian economies to swap their local currencies - either Indian rupee or the Japanese yen against the US$ up to 75 billion.
The deal would be of major help to India as it comes in the backdrop of a falling rupee triggered by gradual increase in the interest rates in the US that has strengthened the US dollar.
India had entered into currency swap pacts with Japan for lesser amounts in the past. But size of deal has been increasing in recent times in line with the growing ties between the two countries.
In 2013, the two sides had approved the enhancing the bilateral currency swap arrangement between the Reserve Bank of India (RBI) and Bank of Japan from $15 billion to $50 billion.
A Finance Ministry statement said that the pact two sides announced today will allow India to tap "foreign capital as and when the need arises, and help to bring down the cost of funds for Indian companies while accessing the foreign capital market."
"The currency swap agreement will have a positive impact on financing India's current account deficit," Shaktikanta Das, member of 15th Finance Commission and former economic affairs secretary tweeted.
During Mr Abe's s last week visit to Beijing for talks with Chinese President Xi Jinping to lower the tension and forge better economic ties, two countries signed an array of pacts including a $30 billion currency swap pact.
Analysists have said the trade tensions between the US and China had brought both Beijing and Tokyo closer than before. Mr Abe was the first Japanese Prime Minister to visit Beijing since 2011.
Japan and India find each other as an important ally to counter the growing Chinese influence in the region.