Ways and Means Advances

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 economy 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. A state Government can withdraw an overdraft for maximum of 14 days consecutively. A state Government can withdraw an overdraft for maximum 36 days in a quarter. The rate of interest is linked to repo rate.


5 Comments

  1. aagrawal

    June 27, 2014 at 1:30 pm

    great work by gktoday team..thanks.

  2. Jyotiranjan khilar

    July 25, 2014 at 11:16 am

    thanks for explaining lucidly..

  3. classmate

    March 7, 2016 at 12:27 am

    Thnx

  4. sreejith101

    July 2, 2016 at 1:08 pm

    Thank you Sir

  5. adett07

    February 11, 2018 at 2:13 am

    thanks for the information. i like your website the most.

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