WAYS AND MEANS ADVANCES (WMA)
Why in news?
- 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.
What is WMA?
- The Reserve Bank of India gives temporary loan facilities to the centre and state governments as a banker to goverment
- The scheme was designed to meet temporary mismatches in the receipts and payments of the government. This facility can be availed by the government if it needs immediate cash from the The WMA is to be vacated after 90 days. Interest rate for WMA is currently Difict
WMA Scheme for State Governments:
- Under the WMA scheme for the State Governments, there are two types of WMA – Special and Normal WMA. Special WMA is extended against the collateral (mortgaging) of the government securities held by the State Government. After the exhaustion of the special WMA limit, the State Government is provided a normal WMA. The normal WMA limits are based on three-year average of actual revenue and capital expenditure of the state. The withdrawal above the WMA limit is considered an overdraft. A State Government account can be in overdraft for a maximum 14 consecutive working days with a limit of 36 days in a quarter. The rate of interest on WMA is linked to the Repo Rate
- Surplus balances of State Governments are invested in Government of India 14-day Intermediate Treasury bills in accordance with the instructions of the State Governments