About: Ways and Means Advances (WMA)
The Reserve Bank of India (RBI) gives temporary loan facilities to the central and state governments. This loan facility is called Ways and Means Advances (WMA).
The Ways and Means Advances scheme was introduced in 1997 to meet mismatches in the receipts and payments of the government.
Under this scheme, a government can avail itself of immediate cash from the RBI as a loan at the existing repo rate. However, the loan repayment has to be done within 90 days.
If the WMA exceeds 90 days, it would be treated as an overdraft (interest rate on overdrafts is 2 percentage points more than the repo rate).
WMA limit:
The limits for Ways and Means Advances are decided by the government and RBI mutually and revised periodically.
For the second half of the 2019-20 financial year, RBI set Rs 35,000 crore as limit for Ways and Means Advances.
Types of WMA:
There are two types of Ways and Means Advances:
Normal
Special
Special WMA: The Special WMA or Special Drawing Facility is provided against the collateral of the government securities held by the state. After the state has exhausted the limit of SDF, it gets normal WMA. The interest rate for SDF is one percentage point less than the repo rate.
Normal WMA: The number of loans under normal WMA is based on a three-year average of actual revenue and capital expenditure of the state.
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| Ways and Means Advances are decided by the government |
The Reserve Bank of India (RBI) gives temporary loan facilities to the central and state governments. This loan facility is called Ways and Means Advances (WMA).
The Ways and Means Advances scheme was introduced in 1997 to meet mismatches in the receipts and payments of the government.
Under this scheme, a government can avail itself of immediate cash from the RBI as a loan at the existing repo rate. However, the loan repayment has to be done within 90 days.
If the WMA exceeds 90 days, it would be treated as an overdraft (interest rate on overdrafts is 2 percentage points more than the repo rate).
WMA limit:
The limits for Ways and Means Advances are decided by the government and RBI mutually and revised periodically.
For the second half of the 2019-20 financial year, RBI set Rs 35,000 crore as limit for Ways and Means Advances.
Types of WMA:
There are two types of Ways and Means Advances:
Normal
Special
Special WMA: The Special WMA or Special Drawing Facility is provided against the collateral of the government securities held by the state. After the state has exhausted the limit of SDF, it gets normal WMA. The interest rate for SDF is one percentage point less than the repo rate.
Normal WMA: The number of loans under normal WMA is based on a three-year average of actual revenue and capital expenditure of the state.
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