TEA, ITF welcome RBI announcements

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 July 31, 2020 is a welcome step said TEA president Raja M Shanmugham in a press release. He added that this measure would be beneficial to Tiruppur knitwear garmenting units, as they have resumed the operations and functioning partially from the second week of May 2020 only.

On the import front also, RBI has decided to extend the time period for completion of outward remittances against normal imports into India from six months to twelve months from the date of shipment for such imports made on or before July 31, 2020, which will be helpful for the specialty fabric and machinery importers, Shanmugham said.

"The extension of moratorium to six months will help our industries to manage the cash flow towards re-starting the business," ITF convenor Prabhu Dhamodharan said in a separate statement. Shanmugham also welcomed the extension of moratorium by another three months from June 1, 2020 till August 31, 2020 taking the total period of applicability of the measures to six months (i.e. from March 1, 2020 to August 31, 2020). "The lending institutions are being permitted to restore the margins for working capital to their original levels by March 31, 2021. Similarly, the measures pertaining to reassessment of working capital cycle are being extended up to March 31, 2021," Shanmugham said.

Conversion of deferred interest as one year team loan will also help the companies to manage liquidity and speed up the revival process, because every rupee is important now to streamline post-COVID-19 business operations, said Dhamodharan.

On the reduction of policy repo rate by 40 bps, he said, "We expected the same level of repo rate reduction and now with today’s announcement, RBI has sent its signals very clearly and now our entire energy should be on talking with banks to get the practical benefit of all rate cuts."

"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 in March 2020 alone, though RBI was reducing the repo rate intermittently from April 2019 onwards. In fact, 0.75 per cent reduction was also announced on March 27, 2020. We hope that the banks would transmit the benefit to customers," said Shanmugham.

Both Shanmugham and Dhamodharan thanked the finance ministry and the RBI for their timely interventions.

"RBI governor mentioned about the vigilance and battle readiness of RBI. These words give confidence to industry players like us about the future and timely interventions by RBI," concluded Dhamodharan.

Fibre2Fashion News Desk (RKS)