An abbreviated form for back-to-back loan; a loan between two entities in different countries denominated in two different currencies, on each leg of the transaction, and with identical maturity dates. Practically, each entity borrowers the other’s currency for a certain period of time, and repays each other’s currency at the specified maturity date. Effectively, the gross interest rates associated with the loan are separate, depending on the commercial rates prevailing in each entity’s place of operation at the time of contract. Each entity can get the currency it needs within involving any exchange rate mechanism.

Notwithstanding the absence of counter impact on interest rate dynamics and currency restrictions on both legs, where the borrowed amounts offset each other in terms of local currencies, back-to-back loans enable cross-border fund flows that may raise withholding tax issues.

In many countries, back-to-back loans have been replaced by a more effective mechanism known as currency swaps.