Ways and Means Advance

Recently, states like Kerala, Punjab and Bihar have said that the Reserve Bank of India’s (RBI) decision to allow 60% higher borrowing under Ways and Means Advances (WMA) compared March 30, 2020 limit, is inadequate given the mounting expenses of states to counter the Covid-19 pandemic.

WMA

  • The WMA are short-term loan facilities which allow the Centre and states to borrow funds from the RBI to bridge their temporary mismatch between expenditure and receipts.
  • The interest rate on WMA is the RBI’s repo rate.
  • The WMA loans have a three-month tenure.
  • States are allowed an overdraft facility (to borrow in excess of WMA ....
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