A week after announcing several steps to boost demand in the wake of coronavirus crisis in India, the Reserve Bank of India (RBI) on Wednesday launched additional measures. The central bank has decided to extend realisation period of export proceeds, limits of way and means advances (WMA) of states/UTs, and mechanism for counter-cyclical capital buffer (CCyB).
Extension of export proceeds realisation period
Presently, the value of the goods or software exports made by the exporters is required to be realised fully and repatriated to the country in 9 months from the date of exports. The RBI has now extended the time for exports made up to or on July 31, 2020, to 15 months from the date of export. The measure will enable them to realise receipts, especially from COVID-19 affected countries, in the extended period and provide greater flexibility to negotiate future contracts.
Review of WMA limit enhanced
The RBI has decided to increase the WMA limit by 30 per cent from the existing limit for states/UTs to enable them to tide over the situation arising from the COVID-19 pandemic. The revised limits will come into force from April 1 till September 30.
Implementation of countercyclical capital buffer extended
The RBI had put in place the framework on counter-cyclical capital buffer (CCyB) on February 5, 2015, wherein it was advised that the CCyB would be activated as and when the circumstances warranted. This framework envisages the credit-to-GDP gap as the main indicator, which is used in conjunction with other supplementary indicators, the RBI said. Based on the analysis of CCyB indicators, the apex bank has decided that it is not necessary to activate CCyB for one year or earlier, central bank said.
Amid the 21-day lockdown in India, the RBI's Monetary Policy Committee, in its meeting held between March 24-27, decided to cut repo rate by 75 basis points to 4.4 per cent, while the reverse repo rate has been reduced by 90 basis points. Calling the current times "extraordinary circumstances", the RBI Governor said the MPC voted for a sizeable reduction in repo rate to revive growth, mitigate COVID-19 impact.