RBI said deepening of the contraction in global activity and trade, accentuated by the outbreak of COVID-19 and its rapid spread, has crippled external demand. This has impacted India’s exports and imports both of which have contracted sharply in recent months
The Reserve Bank of India (RBI) has permitted an increase in the period of realisation and repatriation of export proceeds to India to 15 months (from nine months earlier) from the date of export up to or on July 31.
"It has now been 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," the RBI said in a statement.
The central bank said the deepening of the contraction in global activity and trade, accentuated by the outbreak of COVID-19 and its rapid spread, has crippled external demand. This has impacted India’s exports and imports both of which have contracted sharply in recent months.
"In view of the importance of exports in earning foreign exchange and in providing income and employment; and of imports in bringing in essential requirements of raw materials, intermediates, finished goods and technology, measures are being taken to support the foreign trade sector." it said.
RBI said the move comes in the backdrop of exporters facing genuine difficulties such as delay or postponement of orders and delay in realisation of bills, which is adversely affecting their production and realisation cycles.
It has been decided to extend a line of credit of Rs 15,000 crore to the Export-Import Bank of India (EXIM Bank) for a period of 90 days from the date of availment with rollover up to a maximum period of one year so as to enable it to avail a dollar swap facility to meet its foreign exchange requirements.
The EXIM Bank provides financial assistance to exporters and importers with a view to promoting the country's international trade. In view of the COVID-19 pandemic, however, global trade contracted sharply and global financial markets have turned highly volatile and risk averse, especially to emerging market economies (EMEs).
As Exim Bank predominantly relies on foreign currency resources raised from international financial markets for its operations, it is facing challenges to raise funds in international debt capital markets.
RBI also announced its decision to extend the time period for completion of remittances against normal imports into India (except in cases where amounts are withheld towards guarantee of performance) to 12 months (from six months) from the date of shipment for such imports made on or before July 31.
"The measure will provide greater flexibility to importers in managing their operating cycles in a COVID-19 environment," the statement said.
At present, remittances for normal imports (excluding import of gold/diamonds and precious stones/jewellery) into India are required to be completed within a period of six months from the date of shipment by the overseas supplier, except in cases where amounts are withheld towards guarantee of performance.
RBI said COVID-19 related disruptions to cross-border trade has resulted in a slowdown in manufacturing/sale of finished products and delay in realisation of sale proceeds, both domestically and overseas.
This has elongated the operating cycle for business entities. In this situation, units find it difficult to pay for their imports within the time stipulated under the Foreign Exchange Management Act (FEMA).