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RBI increases WMA limit for Central Govt to Rs 2 lakh cr from 1.2 Lakh cr for H1FY21

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In an important revision, the Reserve Bank of India (RBI) in consultation with Indian Government has increased the limit for Ways and Means Advances (WMA) by 66% for Central Government (UTs) to Rs 2,00,000 crore from Rs 1,20,000 crore for the remaining part of first half of the financial year 2020-21 i.e H1 FY21 (April 2020 to September 2020) to tackle the financial crisis arisen due to COVID-19 pandemic. Last week, RBI increased the WMA limit of state governments by 60%.
RBI ways and means advances

  • With this move states would get greater financial support to undertake COVID-19 containment and mitigation efforts.
  • It should be noted that by Fiscal year end (FYE) i.e. on March 31, 2020 the WMA limit for H1 FY21 was increased to Rs 1.20-lakh crore against Rs.75,000 crore.

Other measures Taken by RBI:

-The continuous overdraft limit for a state increased to 21 working days from 14 days and the number of days a state/union territory can be in overdraft in a quarter raised to 50 working days from 36.

-Under Article 293(3) of Constitution of India, the states are allowed to raise Rs 3.2 trillion during the first 9 months of FY21 of which they can borrow Rs 1.27 trillion during Q1 FY21 (April-June).

-Advance release of Rs 110.92 billion central share from state disaster risk management fund for FY21 and Rs. 61.95 billion revenue deficit will be granted under 15th finance commission.

About WMA and its type
It is a short-term borrowing arrangement between the RBI and central and state governments. RBI as banker to the State Governments provides WMA to the States Under Section 17(5) of RBI Act, 1934 to help them to tide over temporary mismatches in the cash flow of their receipts and payments. They are repayable in each case not later than three months from the date of making that advance.

  • Types of WMA: Normal and special. While normal WMAs are clean advances, special WMAs are secured advances provided against the pledge of Government of India dated securities.

About Reserve Bank of India (RBI):
Headquarters– Mumbai, Maharashtra
Formation– 1 April 1935
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, one is yet to be appointed).