RBI extends interim WMA limit of states to ₹ 51,560 crore by September

The Reserve Bank of India (RBI) announced the extension of Interim Ways and Means (WMA) limit on 7 April, giving a limit of ₹ 51,560 crore to state governments by September to help them cope with the financial stress generated by the second wave of COVID Could meet – 19.

The WMA is a temporary progress made by the RBI to tick off any mismatch in receipts and payments to states.

There are two types of WMA – general and special. While general WMAs are clean advances, special WMAs are advances granted by the Government of India against the pledge of securities.

In addition, the RBI has increased the total WMA limit of states and union territories (UTs) to 47,010 crore per year.

“We have decided to accept the recommendations of an advisory committee set up by the Reserve Bank to review the Ways and Means Advance. [WMA] Limitations for State Governments / Union Territories and other related issues, ”RBI Governor Shaktikanta Das said while announcing the first bi-monthly monetary policy of this financial.

Accordingly, it has been decided to increase the Gross WMA limit of States and Union Territories to 010 47,010 crore, which is an increase of about 46% from the current limit of 32,225 crore which was fixed in February 2016.

He further said, “It has also been decided. [as per the committee suggestion] To continue the increased interim WMA limit of ₹ 51,560 crore granted by the RBI due to the epidemic for six months i.e. until September 30, 2021. “To provide the states a cushion to carry out their essential activities and general financial functions. These increased limits are expected to help the state governments fight the collapse of COVID-19.”

According to RBI regulations, the normal WMA limits are based on a three-year average of the state’s actual revenue and capital expenditures, and withdrawals beyond the limit are considered overdrafts. States pay associated with the repo rate on WMA withdrawals.