Ways and Means Advances (WMA)

The Reserve Bank of India (RBI) has increased the Ways and Means Advance (WMA) limit for States and Union Territories (UTs) to ₹60,118 crore from the previous limit of ₹47,010 crore. This increase aims to help States and UTs manage their fiscal situations more effectively.

Purpose: WMA is a facility provided by RBI to address temporary mismatches in cash flow between receipts and payments.

• Types:
• Normal WMA: Used after the exhaustion of Special WMA.
• Special WMA (now Special Drawing Facility (SDF)): This is used first and has a lower interest rate compared to Normal WMA.
• Interest Rates: Linked to the Repo rate set by the RBI.

Special Drawing Facility (SDF)

• Purpose: Allows States to avail advances against specific collateral.
• Collateral: Can include Consolidated Sinking Fund (CSF), Guarantee Redemption Fund (GRF), and Auction Treasury Bills (ATBs).
• CSF and GRF: Reserve funds that some States maintain with the RBI.

Overdraft Facility

• Purpose: Provided when the financial needs exceed the limits of SDF and WMA.
• Duration: States can typically use this facility for up to 14 consecutive days, though RBI may grant relaxations.

Governance

• All these instruments are governed under the RBI Act of 1934, ensuring they are used in a structured and regulated manner.

By increasing the WMA limit, the RBI aims to provide greater flexibility to States and UTs in managing their short-term financial needs, thereby improving their fiscal stability.