Ways and Means Advances
- 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 limits for WMA are decided by the government and RBI mutually and revised periodically.
Why in News?
- The RBI has announced that the existing interim Ways and Means Advances (WMA) limit of Rs 51,560 crore for all states and Union Territories will continue up to September 30, 2021, as the effect of the Covid-19 pandemic is still prevalent.
- The Reserve Bank will review the WMA limit thereafter, depending on the course of the pandemic and its impact on the economy.
- The RBI said it has revised the WMA Scheme of States and Union Territories (UTs) based on the recommendations of the Advisory Committee on WMA to state governments.
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