Reserve Bank of India (RBI) has increased the Ways and Means Advance (WMA) limit of States/UT to Rs 60,118 crore from existing Rs 47,010 crore.
- This will enable Sates/UTs to better manage their fiscal situation.
- Apart from WMA, Special Drawing Facility (SDF), and Overdraft (OD) facility are important financial accommodation instruments availed by States/UTs.
- These instruments are governed by under the RBI Act, 1934.
About Ways and Means Advance (WMA)
- Advances to States/UTs provided by RBI to meet temporary mismatches in the cash flows of receipts and payments.
- Facility is also available for the Union Government.
- Types: Normal WMA and Special WMA (now known as Special Drawing Facility (SDF))
- First, a state/UT is provided with a special WMA and after its exhaustion, it gets a normal WMA.
- Special WMA has lower interest rate than Normal WMA
- Interest rates are linked to Repo rate.
About Special Drawing Facility (SDF)
- Availed by State against the collateral of Consolidated Sinking Fund (CSF), Guarantee Redemption Fund (GRF), Auction Treasury Bills (ATBs), etc.
- CSF and GRF are reserve funds maintained by some State with the RBI.
About Overdraft Facility
- Facility is provided whenever financial accommodation to a State exceeds its SDF and WMA limits.
- Generally, State Governments/UTs can avail overdraft on 14 consecutive days (relaxation can be provided by RBI).