The Reserve Bank of India (RBI) has decided to increase the Ways and Means Advances (WMA) limit for state governments and union territories by 30 per cent till September 30, and allowed exporters six months extra to realise their export-proceeds, as measures for dealing with the coronavirus-led slowdown.
The central bank also said banks don’t need to activate countercyclical capital buffers (CCyB) for one more year, which means the banks can utilize the capital earmarked for the buffer.
WMA is a temporary liquidity arrangement with the central bank, which enables the centre and the states to borrow money up to 90 days from the RBI to tide over their liquidity mismatch. On Tuesday, The RBI also increased the WMA for the centre to Rs 1.2 trillion for the first half, up from Rs 75,000 crore in the first half last year, and Rs 35,000 crore for the second half of 2019-20 originally announced. In case of the centre, the RBI had said that it may issue bonds if the central government utilizes 75 per cent of its WMA.
In case of states, the central bank has constituted a committee to look into the WMA limits of states and union territories. However, the raising of limit is an ad hoc measure, pending the recommendation of the committee. In mid-March, the RBI had a meeting with all the states to discuss increasing the WMA limit.
Relaxing the export norms, the RBI said exporters can now take 15 months to realise and repatriate their export proceeds, for exports made up to July 31. As per the normal rules, the exporters have to repatriate the export proceeds within 9 months. But the RBI took the call to give the leeway to the exporters to “enable the exporters to realise their receipts, especially from COVID-19 affected countries within the extended period and also provide greater flexibility to the exporters to negotiate future export contracts with buyers abroad”.
The central bank also said banks don’t need to activate countercyclical capital buffers (CCyB) for one more year, which means the banks can utilize the capital earmarked for the buffer.
WMA is a temporary liquidity arrangement with the central bank, which enables the centre and the states to borrow money up to 90 days from the RBI to tide over their liquidity mismatch. On Tuesday, The RBI also increased the WMA for the centre to Rs 1.2 trillion for the first half, up from Rs 75,000 crore in the first half last year, and Rs 35,000 crore for the second half of 2019-20 originally announced. In case of the centre, the RBI had said that it may issue bonds if the central government utilizes 75 per cent of its WMA.
In case of states, the central bank has constituted a committee to look into the WMA limits of states and union territories. However, the raising of limit is an ad hoc measure, pending the recommendation of the committee. In mid-March, the RBI had a meeting with all the states to discuss increasing the WMA limit.
Relaxing the export norms, the RBI said exporters can now take 15 months to realise and repatriate their export proceeds, for exports made up to July 31. As per the normal rules, the exporters have to repatriate the export proceeds within 9 months. But the RBI took the call to give the leeway to the exporters to “enable the exporters to realise their receipts, especially from COVID-19 affected countries within the extended period and also provide greater flexibility to the exporters to negotiate future export contracts with buyers abroad”.
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