Ways and Means Advances
About WMA
- The Reserve Bank of India (RBI) gives temporary loans to the centre and state governments as a banker to the government. This facility is called Ways and Means Advances (WMA). This facility was introduced in 1997.
- Thus, WMA is a temporary liquidity arrangement that helps meet mismatches in receipts and payments of the government.
- Under this scheme, Centre and states can avail themselves of immediate cash from the RBI. But it has to return the amount within 90 days. Interest is charged at the existing repo rate.
- The governments are, however, allowed to draw amounts in excess of their WMA limits. The interest on such overdraft is usually above the repo rate.
- The limits for WMA are decided by the government and RBI mutually and revised periodically.
Why in News?
- The RBI has increased the Ways and Means Advances limits of State governments and Union territories to ₹60,118 crore from ₹47,010 crore.
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