Reserve Bank of India (RBI) today announced few steps to support the industry and overall economy.
And the good part is that the apparel industry is happy with the decisions taken and has thanked the RBI.
RBI reduced the repo rate by 40 basis points (0.4 per cent) from 4.40 per cent to 4 per cent with immediate effect. The reverse repo rate has also been reduced from 3.75 per cent to 3.35 per cent.
The central bank has also has decided to extend the time period for completion of outward remittances against normal imports into India from 6 months to 12 months from the date of shipment for such imports made on or before 31 July 2020, which will be helpful for the speciality fabric and machinery importers.
Another welcome step is the extension of moratorium by another 3 months from 1 June 2020 to 31 August 2020 taking the total period of applicability of the measures to 6 months.
Notably, the lending institutions are allowed to restore the margins for working capital to their original levels by 31 March 2021. Similarly, the measures pertaining to a reassessment of the working capital cycle are being extended up to 31 March 2021.
Raja M. Shanmugham, President, Tirupur Exporters Association (TEA), said “The decision 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 31 July 2020, is beneficial to Tirupur knitwear garmenting units, as they have resumed the operations and are functioning partially from the second week of May 2020 only.”
He also added that in the monitory policy statement, it has been pointed out that the weighted average lending rates on fresh rupee loans of commercial banks declined by 43 bps (Basic Points) in March 2020 alone, though RBI was reducing the repo rate intermittently from April 2019 onwards and in fact, 0.75 per cent reduction was also announced on 27 March 2020 and hoped that the banks would transmit the benefit to customers.
Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF) also welcomed RBI decision and said, “With all these decisions, now our entire energy should be talking to banks to get the practical benefits of all rate cuts. Extension of the moratorium to 6 months will help our industries to manage the cash flow towards re-starting the business.”
He further added that the conversion of deferred interest as one-year team loan also will help the companies to manage the liquidity and speed up the revival process because every rupee is important now to streamline post-COVID business operations.”
