RBI extends interim WMA limit of Rs 51,560 crore to State governments till September

The Reserve Bank of India (RBI) on Wednesday announced an extension of interim Ways and Means Advances (WMAs) limit of Rs 51,560 crore to State governments till September to help them tide over the financial stress posed by the second wave of COVID-19. 

WMAs are temporary advances given by the RBI to the States to tide over any mismatch in receipts and payments. There are two types of WMA – normal and special. While normal WMAs are clean advances, special WMAs are secured advances provided against the pledge of dated government securities.  

“It has been decided to continue the enhanced interim WMA limit of Rs 51,560 crore granted by RBI due to the pandemic for a further period of six months up to September 30, 2021,” the RBI said in a statement.

Acting as the debt manager of the State governments, the RBI’s WMA are intended to provide a cushion to the States to carry on their essential activities and normal financial operations. These increased limits are expected to help State governments spend on fighting the fallout of COVID-19. 

According to the RBI rules, normal WMA limits are based on a three-year average of a State’s actual revenue and capital expenditure, and withdrawals beyond the limit is considered an overdraft. States pay interest linked to the Repo Rate on WMA withdrawals.

In addition, the RBI has enhanced the aggregate WMA limit of States and Union Territories to Rs 47,010 crore per year, an increase of about 46 per cent from the current limit of Rs 32,225 crore which was fixed in February 2016.

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