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.