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RBI announces measures to tackle COVID-19 pandemic

The RBI has announced three important measures to tackle the COVID-19 pandemic and reduce its impact on the Indian economy.

Apr 1, 2020 14:50 IST
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The Reserve Bank of India announced three important measures on April 1, 2020 to tackle the COVID-19 pandemic and reduce its impact on the Indian economy.
 
The three measures include the extension of realisation period of export proceeds, review of way and means limits of the states and union territories and lastly implementation of the countercyclical capital buffer framework.

The measures were announced through an official notification on RBI’s main website. 
 
Following are the three measures in detail:

1. Extension of realisation period of export proceeds

The value of goods and software exports made by exporters currently is required to be realised fully and repatriated to the country within 9 months from the date of the exports. The RBI has decided to extend the time period for realisation and repatriation of export proceeds to the country made up to or on July 31, 2020 to 15 months from the date of the export in the wake of the trade disruption caused by COVID-19 pandemic.

Significance: The move will enable the exporters to get their receipts from COVID-19 affected countries within the extended period. It will also provide the exporters with more flexibility to negotiate future export contracts with buyers abroad. 

2. Review of Way and Means Limits of States/UTs

The RBI had earlier constituted an advisory committee under the chairmanship of Sudhir Shrivastava to review the ways and means limits for the states and UTs. Based on the suggestions of the committee, the RBI has decided to increase the ways and means limit by 30 percent for all states and UTs. 

Significance: The move will enable state governments to handle the situation arising due to the outbreak. The revised ways and means limit will come into force from April 1, 2020. They will be valid until September 30, 2020. 

3. Implementation of countercyclical capital buffer framework 

The RBI had put forward a framework on the countercyclical capital buffer (CCyB) in its guidelines issued on February 5, 2015. Under the framework, the countercyclical capital buffer will be activated when required and the decision will be announced in advance. The CCyB framework envisages the credit-to- GDP gap as the main indicator that is used along with other supplementary indicators. However, the RBI has decided based on the review and empirical analysis of CCyB indicators, that it is not necessary to activate CCyB for one year or earlier. 

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