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RBI ANNOUNCES NEW MEASURES TO COUNTER THE ECONOMIC CONSEQUENCES OF THE CORONA VIRUS

RBI consequences of Corona Virus

The central bank has decided to increase the advance limit it gives to states and UT for forms and funds (WMA) by 30%.

On Wednesday, RBI gave exporters more time to collect and return payments for goods and software sold to foreign buyers in India as the central bank announced new measures to deal with the economic impact of the COVID pandemic- 19.

The central bank has also decided to increase the advance limit it grants to states and UT in the form of forms and funds (WMA) by 30%.

While the RBI announced new measures to deal with the COVID 19 pandemic, it also said that “there is no need” to put in place the countercyclical capital buffer (CCyB) now.

Regarding the extension of the period for earning export earnings, the RBI stated that due to the disruption caused by the COVID-19 pandemic, the period for earning and returning export earnings for exports until July 31, 2020, became 15 months extended from the date of export.

Currently, the value of exports of goods or software made by exporters must be made within 9 months of the date of export and fully returned to the country.

Regarding the WMA, the temporary advances that the RBI makes to the government to overcome the income and payment gaps, the central bank said it had increased the WMA limit by 30% from the current limit for all states / UT allow this problem to be overcome due to the outbreak of the pandemic.

The reserve bank had formed an advisory committee to review the AMM limits for state governments and Union Territories (UT). The decision to increase the limit was made “pending” the committee’s final recommendations. The revised limits will take effect on April 1, 2020, and will apply until September 30, 2020.

On Tuesday, the reserve bank had fixed the WMA limit of the central government for the July-September quarter at Rs 70 billion, after Rs 60 billion for the previous quarter.

Furthermore, based on the review and empirical analysis of the CCyB indicators, it was decided that CCyB should not be “activated” for a period of one year or sooner if necessary.

The RBI established the CCyB framework against the guidelines published in February 2015, which stated that the CCyB would fire if circumstances warrant and that the decision would normally be announced in advance.

The framework considers the credit spread of GDP as the main indicator used in conjunction with other complementary indicators.

The guidelines were issued for the dual purpose of providing a capital buffer in difficult times and to prevent banks from lending indiscriminately in times of excessive credit growth.

Last week, the RBI announced a number of measures, including a drastic cut in the key rate and a moratorium on the repayment of fixed-term loans, as the epidemic of coronavirus triggered a global slowdown in economic activity.

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