RBI announces further measures to deal with COVID-19

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In its press release dated 1 April 2020 (Press Release : 2019-2020/2167), the Reserve Bank of India (“RBI”) announced the following measures to deal with the COVID-19 pandemic:

1.          Extension of realisation period of export proceeds

In view of the disruption caused by the COVID-19 pandemic and in order to enable exporters of goods and software to realise their receipts and to provide greater flexibility to these exporters to negotiate future export contracts with foreign buyers, the time period for realization and repatriation to the country of export proceeds with respect to exports of goods and software made till 31 July 2020 shall be extended to 15 months from the date of the export instead of the existing 9 months from the date of the export.

2.          Review of limits of Way and Means Advances (WMA) of states/union territories

The final recommendation of the Advisory Committee constituted by RBI, under the chairmanship of Shri Sudhir Shrivastava, to review the Ways and Means limits for state governments and union territories is pending to be submitted. However, in the interim, in order to enable the state governments to effectively deal with the situation arising due to the outbreak of the COVID-19 pandemic, RBI has decided to increase WMA limit by 30% from the existing limit for all states and union territories. The revised limits shall come into force with effect from 1 April 2020 and shall be valid till 30 September 2020.

3.          Implementation of countercyclical capital buffer

RBI in its Guidelines for implementation of Countercyclical Capital Buffer (CCCB) dated 5 February 2015 had laid down the framework on CCCB wherein it was advised that the activation of the CCCB shall take place when the circumstances warrant, and that the decision would be pre-announced. Per the framework the credit-to-GDP gap shall be the main indicator for the CCCB and it shall be used in conjunction with other supplementary indicators. Based on the review and analysis of CCCB indicators, RBI has decided that it shall not be necessary to activate the CCCB for a period of one year or earlier.

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