Reserve Bank of India (RBI) today announced slew of measures to support economy and provide adequate liquidity in the banking system, facilitation of bank credit and regulatory measures to reduce the financial stress for the corporate segment.
It also cut the reverse repo rate from 4 per cent to 3.75 per cent, so that banks are nudged to lend more, instead of deploying funds with the RBI.
Shaktikanta Das, RBI Governor, announced these and many more measures to tackle the COVID-19 crisis.
The textile industry does believe that measures such as exclusion of moratorium period for classifying NPA and providing special refinance of Rs. 50,000 crore to meet sectoral credit needs would have a direct positive impact in boosting the industry.
Though the industry well understands the difficulties faced by banks in the current situation with less working hours, it awaits banks’ response at the earliest.
Post the lockdown period, availability of this additional working capital limit will be critical for liquidity management of textile companies to restart the operations.
Welcoming the steps taken by RBI, Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF), one of the well-known trade bodies of Indian textile industry, thanked RBI and Finance Ministry for the support.
ITF had undertaken a survey of its 200 member companies representing the entire value chain of textile manufacturing covering bank exposure in excess of Rs. 3,500 crore. The survey indicated that while the steps taken by the Government and RBI are very proactive, the last mile implementation of the same could kindly be hastened.
“As per our survey, while 19 per cent of the applications for additional working capital limits have been approved by the bankers, closure of substantial per cent of the remaining applications is still either in progress or pending. Among the applicants, 19 per cent are approved, 48 per cent are under process and 31 per cent have not been given a reply for their applications,” said Prabhu.
He also requested the Finance Ministry and RBI to advise banks to expedite the process to ensure quick recovery of business post renewal.
The Apparel Export Promotion Council (AEPC) has also requested the central bank to protect the exporters from the penalty on forward covers due to exchange rate fluctuations.
“It is requested that the charges for exchange rate fluctuations and cancellations are waived for the period for which export orders have been cancelled due to COVID-19,” AEPC Chairman Dr. A. Sakthivel said in a letter to RBI Governor. The charges presently accruable on account of such forward-cover cancellations by exporters are significant and can be a big loss to the sector which is already facing a cash crunch.