Description

The Reserve Bank of India (RBI) increased the aggregate Ways and Means Advances (WMA) limit for State governments and Union Territories (UTs) by 28%, from Rupees 47,010 crore to Rupees 60,118 crore, beginning July 1, 2024. This adjustment, based on recommendations from a select group of state finance secretaries and recent expenditure data, aims to assist states and union territories in managing temporary cash flow imbalances.

WMA Types And Repayment

• Normal WMA- Clean advances are repayable within three months.

• Special WMA- Secured advances against pledges of Government of India-dated securities.

The Special Drawing Facility (SDF)

The SDF, which is tied to investments in marketable securities and Auction Treasury Bills (ATBs), will continue under the existing framework. The maximum amount of SDF that can be used against investments in the Consolidated Sinking Fund (CSF) and Guarantee Redemption Fund (GRF) will be 50% of the lower value between the outstanding sum as of the last day of the second preceding quarter and the current balance in CSF/GRF.

SDF Limits For ATBs

The SDF limit for ATB investments is 50% of the lesser value between the outstanding balance (91/182/364 days) as of the last day of the second preceding quarter and the current ATB balance.

Implementation And Review

This adjustment comes after the RBI's April 2022 review of SDF, WMA, and Overdraft (OD) programs. The RBI's website provides detailed WMA limits per state/UT.

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