On September 30, 2020 The Reserve Bank of India (RBI), in consultation with the Government of India (GoI) has fixed Rs 1,25,000 crore as the Ways and Means Advances (WMA) limit for the 2nd half of the financial year(FY) 2020-21, i.e., October 2020 to March 2021.
- When GOI utilises 75% of the WMA limit, RBI may trigger fresh floatation of market loans.
Interest Rate on WMA/Overdraft
- The interest rate on WMA is equal to the repo rate(current repo rate is 4%).
- In case of overdraft, the interest rate is 2% above the repo rate.
RBI maintains the flexibility to revise the limit at any time, in consultation with GOI, taking into account the prevailing circumstances.
WMA limit of 1st half of FY21
RBI, in consultation with GoI had increased the WMA limit of the Govt for the remaining part of the 1st half of the FY21 (April 2020 to September 2020) from Rs 1.20 lakh crore to Rs 2 lakh crore.
What is WMA?
RBI under Section 17(5) of RBI Act, 1934, provides Ways and Means Advances (WMA) to the States banking with it to help them to tide over temporary mismatches in the cash flow of their receipts and payments.
Borrowing of the GOI
i.The ministry of finance stated that the government will borrow Rs 4.34 lakh crore in the second half of the current fiscal inorder to meet its expenditure needs amidst the COVID-19 crisis afflicting the economy of the country.
ii.The government, with this, will adhere to the revised loan target of Rs 12 lakh crore for the current financial year.
- The borrowing target was revised by the govt to Rs 12 lakh crore in May against Rs 7.8 lakh crore approved in the Budget 2020-21.
Recent Related News:
On January 24, 2020, based on the feedback received from the Voluntary Retention Route (VRR) scheme introduced by the Reserve Bank of India(RBI) in 2009, the central bank(RBI) in consultation with the govt. made certain amendments in the scheme to increase its operational flexibility. As per the amendments The investment limit under VRR has now been increased to Rs 1,50,000 crores (1.5lakh crores) from the earlier Rs 75,000 crores.
About Reserve Bank of India(RBI):
Governor– Shaktikanta Das.
Headquarters– Mumbai, Maharashtra.