"It has been decided, in consultation with the Government of India, that the limits for ways and means advances (WMA) for the second half of the financial year 2020-21 (October 2020 to March 2021) will be Rs 1,25,000 crore," the RBI said in a statement.
The RBI has been proactive in reducing Policy Rates with 1.15% cut in Repo Rates, which was implemented from March of 2020
The Reserve Bank of India (RBI) on Wednesday set the ways and means advances (WMAs) limit at Rs 1.25 lakh crore for the central government for the second half of the fiscal year. WMAs are temporary advances given by the RBI to the government to tide over any mismatch in receipts and payments. “It has been decided, in consultation with the Government of India, that the limits for ways and means advances (WMA) for the second half of the financial year 2020-21 (October 2020 to March 2021) will be Rs 1,25,000 crore,” the RBI said in a statement.
The central bank further said it may trigger fresh floatation of market loans when the government utilises 75 per cent of the WMA limit. “The Reserve Bank retains the flexibility to revise the limit at any time, in consultation with the Government of India, taking into consideration the prevailing circumstances,” it said. The interest rate on WMA is equal to the repo rate and on overdraft, it is two per cent above the repo rate. The current repo rate is 4 per cent.
Meanwhile, the finance ministry said the government will borrow Rs 4.34 lakh crore in the second half of the current fiscal to meet its expenditure requirement amid the COVID-19 crisis afflicting the country’s economy. With this, the government will stick to the revised borrowing target of Rs 12 lakh crore borrowing for the current fiscal. The government revised the borrowing target to Rs 12 lakh crore in May as against Rs 7.8 lakh crore approved in the Budget 2020-21.
In another statement, the RBI said that to help institutional and retail investors plan their investments efficiently, an indicative calendar for issuance of the government dated securities for the second half of the fiscal year 2020-21 has been prepared. It will also provide transparency and stability to the government securities market, the RBI added.
“As evident from the calendar, the second half borrowing programme of the Government of India is expected to be completed by January 2021 to help generate sufficient space to manage the borrowing programme of the state governments smoothly,” the RBI said. All the auctions covered by the calendar will have the facility of non-competitive bidding scheme, under which 5 per cent of the notified amount will be reserved for the specified retail investors.