The Reserve Bank reduced the Ways and Means Advances (WMA) for states and union territories to Rs 47,010 crore from Rs 51,560 crore on Friday, citing an improvement in the economic scenario. WMAs are short-term loans provided by the RBI to the government to help it deal with any discrepancies between receipts and payments.
- Due to the uncertainty surrounding COVID-19, the RBI increased the WMA limit for all states to Rs 51,560 crore. The new WMA was in effect until March 31, 2022.
- RBI stated it has decided to revert to the WMA limitations and deadlines for Over Draft (OD) for state governments / UTs, as recommended by the Advisory Committee on Ways and Means Advances to State Governments, following a review of the limits and in light of the gradual easing of COVID-19 restrictions.
- The Special Drawing Facility (SDF) used by state governments and UTs would continue to be linked to the amount of marketable securities issued by the government of India, such as Auction Treasury Bills, according to the RBI (ATBs).
- The interest rate on SDF, WMA, and OD will continue to be linked to the Reserve Bank’s policy rate, the repo rate.
- The central bank further stated that interest will be charged for all days the advance is outstanding.
- The Government of India’s WMA limit for the first half of fiscal year 2022-23 has been set at Rs 1,50,000 crore.