The Reserve Bank of India (RBI) in consultation with the Government of India has set the limits for Ways and Means Advances (WMA) for the first half of the financial year 2019-20 (April 2019 to September 2019) at Rs 75000 crore.
The Reserve Bank of India gives temporary loan facilities to the centre and state governments as a banker to government.This temporary loan facility is called Ways and Means Advances (WMA).
It was introduced on April 1,1997.This facility can be availed by the government if it needs immediate cash from the RBI.The WMA is to be vacated after 90 days.
Interest rate for WMA is charged at the repo rate.The limit for WMA are mutually decided by the RBI and the Government of India.
There are two types of WMA – normal and special.The normal WMA limits are based on three year average of actual revenue and capital expenditure of the state.Special WMA are secured advances provided against the pledge of government of India dated securities.The operative limit for special WMA for a state is subject to its holdings of central government dated securities up to a maximum of limit sanctioned.
In addition,the RBI has determined limits for normal and special WMA for each state as multiples of the prescribed minimum balance required to be maintained with the RBI by that state.These limits have been revised periodically.