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Indian Economy

RBI’s Measures to Fight Economic Disruptions

  • 02 Apr 2020
  • 3 min read

Why in News

The Reserve Bank of India (RBI) has extended the realisation period of export proceeds and Ways and Means Advance (WMA) limit of state governments.

Key Points

  • Extended the Realisation Period of Export Proceeds
    • The time period for realisation and repatriation of export proceeds made up to or on July 31, 2020 has been extended to 15 months from the date of export.
    • Earlier, the value of the goods or software exports made by exporters is required to be realised fully and repatriated to the country within nine months from the date of exports.
    • The measure will enable exporters to realise their receipts, especially from COVID-19 affected countries, within the extended period, and also provide greater flexibility to exporters to negotiate future export contracts with buyers abroad.
    • Export activities have been disrupted in the wake of the pandemic and lockdown in many countries.
  • Increased Ways and Means Limit
    • RBI has formed an advisory committee to review the Ways and Means limit for State governments and Union Territories.
    • Till the panel submits its report, the RBI has increased the Ways and Means advances limit by 30% for States and union territories.
    • The revised limits will come into force with effect from April 1, 2020 and will be valid till September 30, 2020.
    • Recently, the Central Government has hiked Ways and Means Advance (WMA) limit with the Reserve Bank of India (RBI) by 60%.
    • The ‘Ways and Means Advances’ is a scheme that helps meet mismatches in receipts and payments of the government. Under this scheme, a government can avail itself of immediate cash from the RBI.
  • Deferred Counter Cyclical Capital Buffer (CCyB)
    • The RBI has deferred the implementation of Counter Cyclical Capital Buffer (CCyB) for banks.
    • It has decided that it is not necessary to activate CCyB for a period of one year or earlier, as may be necessary.
    • CCyB is the capital to be kept by a bank to meet business cycle related risks.
      • It is aimed to protect the banking sector against losses from changes in economic conditions like recession.
      • This is an important theme of the Basel III norms.

Source: TH

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