RBI relaxes realisation period for export proceeds

In view of the disruptions caused to global trade by the Coronavirus pandemic, the RBI has granted relaxation in timeline for realisation of export proceeds by 6 months to 15 months from current 9 months for exports made up to 31st July. This operational flexibility which will allow exporters to extend longer credit periods to overseas buyers and help them negotiate contracts better. This DOES NOT entail extension of existing forwards booked which will have to be rolled over at maturity (after 3 days Grace) if collection is not received. Cash loss if any on cancellation and rebooking will not be averted. 

Also in order to help the states and Union territories tide over the liquidity crunch, the RBI has increased the WMA (Ways and Means Advances) limit by 30%. The WMA is a window through which the the RBI provides short term credit to centre and states for upto 90 days to help them tide over temporary mismatches between receipts and payments. This may help cool off the SDL spreads. The states have borrowed at spreads of 120-140bps over corresponding tenor Gsec yields in last two  SDL auctions. The RBI had yesterday increased the WMA limit for central government to Rs 120000cr from 75000cr

Also the RBI has decided not to activate the counter cyclical buffer which will give banks relief in terms of capital requirements. The banks will need to hold less capital as a percentage of their risk weighted assets.