Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced a slew of measures to help country's exporters and importers amid a slump induced by the global coronavirus crisis. The announcements were part of the RBI's surprise decision to advance its monetary policy statement by at least 10 days.
In his statement, Das said the monetary policy committee unanimously decided to slash the repo rate, with a 5:1 majority voting in favour of a 40-basis-point reduction to 4 per cent. The reverse repo rate was also brought down to 3.35 per cent. The central banks' stance on inflation and outlook on gross domestic product were also revealed on Firday.
Taking cognizance of the slowdown in the midst of the Covid-19 pandemic, the RBI announced a few measures to help the export-import sector. Das said: "The deepening of the contraction in global activity and trade, accentuated by the rapid spread of Covid-19, has crippled external demand. In turn, this has impacted India’s exports and imports, both of which have contracted sharply in recent months. In view of the importance of exports and imports to the economy, certain measures are being taken to support the foreign trade sector".
Here are some decisions that should help the ailing foreign trade sector:
The RBI decided to increase the maximum permissible period of pre-shipment and post-shipment export credit sanctioned by banks from the existing one year to 15 months, for disbursements made up to July 31, 2020.
This was done to help exporters support their production and realisation cycles. Simply put, any exporter who has taken credit from a bank can repay it in 15 months instead of one year. The additional three months will come as a relief to exporters as businesses have taken a serious hit due to Covid-19.
Liquidity for Exim Bank of India
The RBI extended a Rs 15,000-crore line of credit to the Exim Bank for a period of 90 days (with rollover up to one year) to enable it to avail of a US dollar swap facility. This means that the Exim Bank will have additional Rs 15,000 crore at its disposal to lend to businesses.
As the name suggests, the Export-Import Bank lends money to the exporters and importers to promote international trade. With this extra liquidity, Exim Bank can lend more and businesses can seek funds to resume their work to emerge out of the crisis.
Extension of time for payment for Imports
Like exporters, the RBI has provided some relief to the importers as well. As the operating cycles have been disrupted for all busineess due to the coronavirus pandemic, the RBI has extended time period for completion of outward remittances against normal imports (i.e. excluding import of gold/diamonds and precious stones/jewellery) into India from six months to twelve months from the date of shipment for such imports made on or before July 31, 2020.
Therefore, businesses will have extra six months to pay their outward remittances, thereby getting a breather to deal with the crisis and not stress their ledgers.
In all, the Reserve Bank has given exporters and importers liquidity support and extra time to manage their dues, which was much needed at a time when the global economy is facing a crisis and uncertainity.
or reload the browser