The RBI announces additional measures to deal with the coronavirus crisis

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New Delhi: The Reserve Bank of India has announced new measures to reduce the compliance burden for sectors of the Indian economy most affected by the coronavirus pandemic. Accordingly, it has extended the time to realize export earnings to give exporters more time to comply with regulations.

Currently, the value of exports of goods or software made by exporters must be fully realized and returned to the country within nine months of the date of export. The export period until or on July 31, 2020 has been extended to 15 months from the export date.

“The measure will allow exporters to realize their revenues, especially from COVID-19 affected countries, within the extended period and give them more flexibility in negotiating future export contracts with buyers abroad,” said a statement by RBI.

Apex Bank has also decided to increase the WMA for all states / UTs by 30 percent so that they can overcome the situation due to the coronavirus pandemic. The revised limits will enter into force on April 1, 2020 and will apply until September 30, 2020.

The RBI, chaired by Sudhir Shrivastava, had set up an advisory committee to review the State and Subway Limit Values. The decision to increase the limit was made, although the final recommendations are still pending.

In a further decision, the RBI decided not to activate the countercyclical capital buffer (CCyB) for a year or earlier, if this is necessary. This would free banks from maintaining a capital buffer at a time when the investment climate in the economy needs to be boosted by providing simple loans to industry.

The framework for CCyB was set by the RBI in relation to the guidelines issued on February 5, 2015, which indicated that the CCyB should be activated when circumstances warrant, and that the decision will normally be announced in advance . The framework provides for the credit-to-GDP gap to be the main indicator used in conjunction with other complementary indicators.

The central bank had tried to cushion both borrowers and lenders against the unprecedented disruption of the COVID 19 outbreak last week, and had given bankers a three-month grace period for loan repayment.

It also gave the banks a break from standard tagging when customers skip payments. All three-month loans, including agricultural fixed-term loans, retail and crop loans, and working capital payments, are covered by the three-month moratorium, according to RBI.

“All commercial banks, NBFCs (Nonbanking Finance Companies) and financial institutions across India can grant a three-month moratorium on payment of all installments due between March 1, 2020 and May 31, 2020,” the RBI said on Friday.

The measures came on the day that the central bank lowered the reference repo rate to a record low to boost demand when the nation of more than a billion consumers end their Covid-19 ban according to the current schedule by mid-April should.

The new central bank measures have been announced here

1. Extension of the realization period of the export earnings

Currently, the value of exports of goods or software by exporters must be fully realized and returned to the country within 9 months from the date of export. Given the disruption caused by the COVID-19 pandemic, the period for realizing and recovering export earnings for exports has been extended to 15 months from or until July 31, 2020 from the date of export. The measure will allow exporters to realize their revenues, especially from COVID-19 affected countries, within the extended period, and will give exporters more flexibility in negotiating future export contracts with buyers abroad.

2. Review of travel limits and advances from states / UTs

The Reserve Bank had formed an advisory committee (chairman: Shri Sudhir Shrivastava) to review the limits for ways and means for state governments and Union territories (UTs). Pending the final recommendations from the committee, it was decided to increase the WMA border by 30 percent over the existing border for all states / UT so that state governments can break out of the situation that may result from the outbreak of the COVID 19 pandemic results. The revised limits will enter into force on April 1, 2020 and will apply until September 30, 2020.

3. Implementation of a countercyclical capital buffer

The countercyclical capital buffer (CCyB) framework was set by the reserve bank in relation to the guidelines issued on February 5, 2015, which indicated that the CCyB should be activated when circumstances warrant, and that the decision would normally be made will be announced in advance. The framework provides for the credit-to-GDP gap to be the main indicator used in conjunction with other complementary indicators. Based on the review and empirical analysis of the CCyB indicators, it was decided that it is not necessary to activate CCyB for a period of one year or earlier if this is necessary.



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