RBI Lowers Limit For Ways And Means Advances (Wma) For States.

April 25, 2022

Why in news?

In view of Improving pandemic situation, RBI decided to reduce WMA for States and UTs to ₹ 47,010 crore from ₹ 51,560 crore.
- Considering COVID-19 related uncertainties, RBI had raised WMA limit in 2021.
Under RBI Act 1934, WMAs are temporary advances given by the RBI to Centre and States to tide over any mismatch in receipts and payments.
- States/Centre pay interest linked to the repo rate on WMA withdrawals.
- WMA is not part of the Fiscal Responsibility and Budget Management Act (FRBM) because they get paid within the year itself.
Two types of WMA – normal and special.
- While normal WMA are clean advances, Special WMA or Special Drawing Facility (SDF) is provided against the collateral of government securities held by state.
- After the state has exhausted SDF limit, it gets normal WMA.
In addition to WMA, the Over Draft facility is also provided whenever financial accommodation to a State exceeds its SDF and WMA limits.
There is a State-wise limit for the funds that can be availed via WMA. These limits depend on factors such as total expenditure, revenue deficit and fiscal position of the State.
Limits for WMA are decided by the government and RBI mutually and revised periodically.