RBI announcement is likely to give exporters adequate buffers to realise and repatriate export proceeds.
The Reserve Bank of India announced more measures on Wednesday to deal with the economic fallout of coronavirus, including an extension of the period for realisation and repatriation of export proceeds, in a move aimed to help businesses. The banking regulator had earlier announced several measures including slashing of bank rates to ease liquidity pressure and to stabilise the markets and the financial sector, along with steps to give major relief to individual borrowers by announcing measures including a three-month moratorium on EMIs of various loans including personal, housing and auto.
Here are the additonal business-specific measures announced by the RBI on Wednesday
Extension of realisation period of export proceeds by six months
Presently the value of the goods or software exports made by the exporters is required to be realized fully and repatriated to the country within a period of 9 months from the date of exports. In view of the disruption caused by the COVID-19 pandemic, the time period for realization and repatriation of export proceeds for exports made up to or on July 31, 2020, has been extended to 15 months from the date of export. The measure will enable the exporters to realise their receipts, especially from COVID-19 affected countries within the extended period and also provide greater flexibility to the exporters to negotiate future export contracts with buyers abroad.
Review of Limits of Way and Means Advances of States/UTs
Reserve Bank also increased the Ways and Means limits for state governments and Union Territories by 30 percent from the existing limit to enable the states to tide over the situation arising from the outbreak of the COVID-19 pandemic. The revised limits will come into force with effect from April 1, 2020 and will be valid till September 30, 2020.
Implementation of countercyclical capital buffer
RBI also deferred the activation of Countercyclical capital buffer or CCyB for a period of one year. The framework envisages the credit-to-GDP gap as the main indicator, which is used in conjunction with other supplementary indicators.
Meanwhile, Congress has asked finance minister Nirmala Sitharaman to ensure that the RBI circular regarding deferment of EMIs be issued widely and that interest subvention arrangement should be made for the interest on the deferred EMI payments.