RBI extends temporary advances limit of Rs 51,560 crore for states, UTs till September

By: |
April 23, 2021 7:35 PM

The Reserve Bank will review the WMA limit thereafter, depending on the course of the pandemic and its impact on the economy, the central bank said.

RBI"Going forward, as growth revives and economy gets back on track, it is important for the government to adhere to a clear exit strategy and build fiscal buffers, which can be tapped into in events of future shocks to growth," the RBI said.

The RBI on Friday said the existing interim Ways and Means Advances (WMA) limit of Rs 51,560 crore for all states and Union Territories will continue up to September 30, 2021, as the effect of the COVID-19 pandemic is still prevalent.

WMAs are temporary advances given by the RBI to the government to tide over any mismatch in receipts and payments.
The RBI said it has revised the WMA Scheme of States and Union Territories (UTs) based on the recommendations of the Advisory Committee on WMA to state governments. The WMA limit arrived at by the Committee based on total expenditure of States/ UTs, works out to Rs 47,010 crore.

“As the effect of the COVID-19 pandemic is still prevalent, the existing interim WMA limit of Rs 51,560 crore for all States/ UTs shall continue for six months i.e., up to September 30, 2021,” it said in a statement.

The Reserve Bank will review the WMA limit thereafter, depending on the course of the pandemic and its impact on the economy, the central bank said.

It further said Special Drawing Facility (SDF) availed by state governments and UTs will continue to be linked to the quantum of their investments in marketable securities issued by the Government of India, including the Auction Treasury Bills (ATBs).

The net annual incremental investments in Consolidated Sinking Fund (CSF) and Guarantee Redemption Fund (GRF) will continue to be eligible for availing of SDF, without any upper limit. CSF and GRF are reserve funds maintained by some State Governments with the Reserve Bank of India.

“A uniform hair cut of 5 per cent shall be applied on the market value of securities, for determining the operating limit of SDF on a daily basis,” the RBI said.

Interest rate on SDF, WMA and Overdraft will continue to be linked to the policy rate (repo) of the Reserve Bank.

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