RBI extends realisation period of export proceeds from 9 months to 15 months

In view of the disruption caused by COVID-19 pandemic, Reserve Bank of India extended the time period for repatriation of fully realised export proceeds for exports made up to or on July 31, 2020. As per the new direction issued by RBI on April 1, 2020, exporters are required to fully realize and repatriate the value of the goods or software exported to the country within 15 months in place of the existing time limit of 9 months from the date of export. This relief is available to exporters for the exports made up to July 31, 2020. “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”, the RBI circular said. Reserve bank also mentioned in its circular dated April 1, 2020, that the banks need not activate countercyclical capital buffer (CCCB or CCyB) for a period of one year or earlier, as may be necessary.

The countercyclical capital buffer is a form of Common Equity Tier 1 (CET 1) capital or other fully loss-absorbing capital only maintained by the banks. This is with the objective of building up a buffer of capital in good times which may be used to maintain flow of credit to the real sector in difficult times. It also achieves the broader macroprudential goal of restricting the banking sector from indiscriminate lending in the periods of excess credit growth that have often been associated with the building up of system-wide risk. The amount of the CCCB may vary from 0 to 2.5% of total risk-weighted assets (RWA) of the banks. RBI may advise the banks to build up the buffer, the decision of which would normally be pre-announced with a lead time of 4 quarters or in a shorter span of time based on the review and empirical analysis of CCyB indicators.