Ways and Means Advances - General Knowledge Today

Ways and Means Advances

Now, we know that RBI works as a banker to the State Governments by agreement. But there is no fixed minimum reserve balance for the State Governments. All state Governments are required to maintain a minimum reserve balance with RBI, but it depends upon the size of the economyeconomy of the state and its budget.

However, there are times, when there is a temporary mismatch in the cash flow of the receipts and payments of the State Governments. To handle this mismatch, there is a WMA scheme / facility which refer to Ways and Means Advances.

  • RBI makes WMA to the state governments for a period of 90 Days.
  • If the state government take WMA against the collateral Government securities, it is called Special WMA.
  • If they are not against the security, then they are provided WMA based upon the three-year average of actual revenue and capital expenditure of the state. This is called normal WMA.
  • WMA limits are if exceeded, is called overdraft.

Management of Public Debt:


 

Last Updated: November 22, 2013

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Comments

  1. aagrawal says:

    great work by gktoday team..thanks.

  2. Jyotiranjan khilar says:

    thanks for explaining lucidly..