MSMEs hail RBI’s time extension for receiving payments on exports from Covid-19 hit countries

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Updated: April 1, 2020 9:52:38 PM

Trade, Imports, Exports for MSMEs: The RBI said that the extension will help exporters “realise their receipts, especially from COVID-19 affected countries within the extended period.”

trade, economyExporters have so far been required to ensure payments are received in foreign currencies to India for goods exported within nine months.

Trade, Imports, Exports for MSMEs: MSMEs, which contributed nearly half of India’s exports in FY19, has welcomed the Reserve Bank of India’s (RBI) move on Wednesday to extend the time period from current nine months for exporters to receive payments on exports from buyers, particularly in Coronavirus affected countries. The RBI in a statement said that “in view of the disruption caused by the Covid-19 pandemic, the time period for realization and repatriation of export proceeds for exports made up to or on July 31, 2020, has been extended to 15 months from the date of export.”

“Absolutely it will benefit MSMEs. This will help all exporters because, with the slowdown in demand and liquidity, buyers will take little more time to send back the remittances. It is a welcoming move and will help the export sector in tweaking their regulatory norms for realising the payments and looking into the lack of demand and liquidity challenges,” Ajay Sahai, DG and CEO, Federation of Indian Export Organisations told Financial Express Online. The longer repatriation period acts as a “marketing tool” as buyers would be more willing to buy products from you, Sahai added. However, in the current situation, it has more to do with the slow demand and lack of liquidity.

The RBI noted that the extension will help exporters “realise their receipts, especially from COVID-19 affected countries within the extended period” and would provide “greater flexibility to the exporters to negotiate future export contracts with buyers abroad.” “This will necessitate analogous relaxations for benefits prescribed under the Customs and Foreign Trade Policy (particularly the MEIS scheme),” Gunjan Prabhakaran, Partner – Indirect Tax, BDO India told Financial Express Online.

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Exporters have so far been required to ensure payments are received in foreign currencies to India for goods exported within nine months from the date of export. However, “in case of delay of payments, exporters have to explain the reason for the delay to the RBI. Sometimes they get an extension to get payments. In some cases, exporters are blacklisted as well. The six-month extension hence is a big relief for MSME exporters,” Rajiv Chawla, Chairman at MSME association IamSMEofIndia told Financial Express Online.

Countries that have undergone mass quarantines and border closures or lockdown in cities according to multiple media reports include Russia, South Africa, New Zealand, the UK, Australia, European Union, Germany, France, Spain and more. “Exports are stuck in countries under lockdown. For instance, the goods exported are stuck at ports because of lockdown and so payment is also affected. And buyers are not able to receive goods even as they have stopped receiving orders,” added Chawla.

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