Ways and Means Advances

Mains Paper 3 : Mobilization Of Resources |

Note4Students

From UPSC perspective, the following things are important :

Prelims level : WMA

Mains level : Liquidity management measures by RBI


News

  • RBI may trigger fresh floatation of market loans when Government utilizes 75% of the WMA limit.
  • The interest rate on WMA will be Repo Rate and overdraft will be 2% above the Repo Rate.

Ways and means advances (WMA)

  • The Reserve Bank of India gives temporary loan facilities to the centre and state governments as a banker to government.  This temporary loan facility is called Ways and Means Advances (WMA).
  • It is a mechanism to provide to States to help them tide over temporary mismatches in the cash flow of their receipts and payments.
  • It was introduced on April 1, 1997, after putting an end to the four-decade old system of adhoc (temporary) Treasury Bills to finance the Central Government deficit.
  • This facility can be availed by the government if it needs immediate cash from the RBI. The WMA is to be vacated after 90 days.
  • Interest rate for WMA is currently charged at the repo rate. The limits for WMA are mutually decided by the RBI and the Government of India.
RBI Notifications
  • Subscribe

    Do not miss important study material

Leave a Reply

Please Login to comment
  Subscribe  
Notify of