RBI Announcement: RBI announces more measures to deal with Covid-19 pandemic | India Business News – Times of India

NEW DELHI: The Reserve Bank of India (RBI) on Wednesday announced more measures to counter the economic fallout of the fast-spreading coronavirus pandemic. In a notification, the central bank mentioned that it has extended the realisation period of export proceeds, increased WMA (Way and Means Advances) limit and implemented countercyclical capital buffer.
Here are the details on measures taken by the Reserve Bank:
* Extension of realisation period of export proceeds: Presently value of the goods or software exports made by the exporters is required to be realised 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 realisation 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 virus affected countries within the extended period and also provide greater flexibility to the exporters to negotiate future export contracts with buyers abroad.
* Review of WMA limits of States/UTs: The RBI had constituted an advisory committee to review the WMA limits for state governments and Union Territories (UTs). Pending submission of the final recommendations by the committee, it has been decided to increase WMA limit by 30 per cent from the existing limit for all states/UTs to enable the state governments to tide over the situation arising from the outbreak of coronavirus. 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: The framework on countercyclical capital buffer (CCyB) was put in place by the Reserve Bank in terms of guidelines issued on February 5, 2015 wherein it was advised that the CCyB would be activated as and when the circumstances warranted, and that the decision would normally be pre-announced. The framework envisages the credit-to-GDP gap as the main indicator, which is used in conjunction with other supplementary indicators. Based on the review and empirical analysis of CCyB indicators, it has been decided that it is not necessary to activate CCyB for a period of one year or earlier, as may be necessary.
Earlier, the RBI had allowed banks to put on hold EMI (equated monthly instalment) payments on all term loans for three months as it slashed the cost of fresh borrowing by cutting policy interest rate by steepest in more than 11 years, joining the efforts of the government to counter the economic fallout of the fast-spreading coronavirus pandemic.
The Reserve Bank, which brought forward by a week the key meeting of the monetary policy committee, also announced steps to boost liquidity worth 3.2 per cent of the gross domestic product, and said it will retain its accommodative stance as long as it is necessary to revive growth and mitigate the impact of coronavirus on the economy.
The benchmark repurchase or repo rate was slashed by 75 basis points to 4.40 per cent from 5.15 per cent, while the Cash Reserve Ratio – the amount of deposits banks must set aside as reserves – was cut by 100 basis points to 3 per cent to boost liquidity.
The biggest rate cut since January 2009 takes interest rate to the lowest in more than a one-and-a-half decade (lowest since October 2004). The reverse repo rate was reduced 90 basis points to 4 per cent, creating an asymmetrical corridor.
RBI governor Shaktikanta Das said all commercial banks have been permitted “to allow a moratorium of three months on payment of installments in respect of all term loans outstanding as on March 1, 2020”.
The RBI measures came after the government unveiled a Rs 1.7 lakh crore package of free foodgrains and cash doles to the poor to deal with the economic impact of the unprecedented 21-day nationwide lockdown
This was the first time in five years that the RBI has acted outside the scheduled dates for policy meetings. The monetary policy committee (MPC) was originally scheduled to meet on April 1-3. The last time RBI cut rates in an out-of-turn move was in March 2015 following a budget announcement.
Around 8,00,000 people have been infected with the coronavirus across the globe, with global death toll rising to more than 42,000.
(With PTI inputs)

via RBI Announcement: RBI announces more measures to deal with Covid-19 pandemic | India Business News – Times of India

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