It has been revised after taking into account the average of revenue receipts for the fiscal years 2001-02, 2002-03 and 2003-04 (revised estimates) and then applying to this average a multiplication factor of 3.19% for the non-special category states and 3.84% for the special category states, respectively, as recommended by the Advisory Committee on WMA to state governments (Ramachandran Committee).
As per the WMA Scheme of 2003, the rate of interest charged on normal WMA is (a) bank rate (currently 6%) for the period of one to 90 days and (b) 1% above the bank rate for the period beyond 90 days.
The Special WMA limit is linked to the investments made by state governments in government securities i.e., dated securities and treasury bills. A lower and uniform margin of 5% is being applied now on the market value of the securities for determining the operating limit of Special WMA. The States have to avail of Special WMA limits first before seeking accommodation under the normal WMA limits.
State governments have to maintain a minimum balance with the RBI. The maximum number of days that a state can be in overdraft is 14 consecutive working days. In case the overdraft continues in the states account beyond 14 consecutive working days, RBI and its agencies stop payments in respect of the concerned state government.
The existing norm of restricting the overdraft to 100% of the normal WMA limit continues. If the overdraft exceeds this limit for five consecutive working days for the first time in a financial year, RBI advises the state to bring down the overdraft level within 100% of the WMA limit. If, however, such irregularity occurs on a second or subsequent occasion in the financial year, RBI will stop payments notwithstanding the provision which permits the state overdraft up to 14 days.
No state government is allowed to be in overdraft for more than 36 working days in a quarter. If this is not adhered to, payments will be stopped. The rate of interest on overdraft is: (a) overdraft up to 100% of normal WMA limit - 3% above the bank rate, and (b) overdraft exceeding 100% of the normal WMA limit - 6% above the bank rate.