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Photo: Mint
Photo: Mint

RBI raises WMA limit for states, UTs by 30%; eases export norms

  • The revised WMA limit is effective immediately till 30 September
  • RBI announced three measures on Wednesday to cope with the economic fallout of the covid-19 crisis

MUMBAI: The Reserve Bank of India (RBI) has raised the Ways and Means Advances, or WMA, limit by 30% for all states and union territories to enable them to tide over the crisis caused by the coronavirus (covid-19) outbreak. The revised limit is effective immediately till 30 September.

The decision is part of the three measures announced by the central bank on Wednesday to cope with the economic fallout of the covid-19, commonly known as the coronavirus, pandemic.

Apart from the decision on the WMA limit, the Reserve Bank has also deferred implementation of countercyclical capital buffers (CCyB) and extended the realisation period for export proceeds.

The RBI also extended the time period for realisation and repatriation of proceeds for exports made up to or on 31 July to 15 months from the date of export. At present, the value of goods or software exports made by the exporters needs to be realised fully and repatriated to the country within nine months from the date of export.

“The measure will 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," RBI said.

The central bank said the framework on CCyB was put in place under the guidelines issued on 5 February, 2015. It had said CCyB's activation would depend on the circumstances warranted. “Based on the review and empirical analysis of CCyB indicators, it has been decided that it is not necessary to activate CCyB for a period of one year or earlier, as may be necessary," it said.

The framework envisages the credit-to-gross domestic product (GDP) gap as the main indicator, used in conjunction with other supplementary indicators, RBI said. It requires banks to build up a buffer of capital in good times, which may be used to maintain flow of credit to the real sector in difficult times. The buffer was also meant to restrict the banking sector from indiscriminate lending in the periods of excess credit growth, which have often been associated with the building up of system-wide risk.

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