From UPSC perspective, the following things are important :
Prelims level : Consolidated Sinking Fund (CSF)
Mains level : Paper 3- RBI extends WMA scheme
About Ways and Means credit
- Simply put, it is a facility for both the Centre and states to borrow from the RBI.
- WMAs are temporary advances given by the RBI to the government to tide over any mismatch in receipts and payments.
- Section 17(5) of the RBI Act, 1934 authorises the central bank to lend to the Centre and state governments subject to their being repayable “not later than three months from the date of the making of the advance”.
Extension of the scheme
- The RBI decided to continue with the existing interim Ways and Means Advances (WMA) scheme limit of ₹51,560 crore for all States/ UTs shall for six months given the prevalence of COVID-19.
- Based on the recommendations of the Advisory Committee on WMA to State Governments, 2021 — chaired by Sudhir Shrivastava — the RBI had revised the WMA Scheme of States and Union Territories (UTs).
- The WMA limit arrived at by the Committee based on total expenditure of States/ UTs, works out to ₹47,010 crore.
What RBI said about SDR
- The RBI further said Special Drawing Facility (SDF) availed by state governments and UTs will continue to be linked to the quantum of their investments in marketable securities issued by the Government of India.
- The net annual incremental investments in Consolidated Sinking Fund (CSF) and Guarantee Redemption Fund (GRF) will continue to be eligible for availing of SDF, without any upper limit.
- CSF and GRF are reserve funds maintained by some State Governments with the Reserve Bank of India.