With the pandemic situation improving, the Reserve Bank on Friday decided to reduce Ways and Means Advances (WMA) for states and union territories (UTs) from 51,560 crore to 47,010 crore.
WMA are temporary advances that the RBI grants to the government to cover any discrepancies in revenue and payments.
In light of the uncertainties surrounding COVID-19, the RBI had raised the WMA limit to 51,560 crore for all states. The higher WMA was in effect until March 31, 2022.
In reviewing the limits and considering the gradual lifting of COVID-19 restrictions, the RBI said it had decided to return to the WMA Over Draft (OD) limits and schedules for State Governments/UTs as recommended by the Advisory Committee about ways and means of progress to state governments.
These standards will come into effect on April 1, 2022 and are subject to review.
RBI further said that the Special Draw Facility (SDF) drawn by state/UT governments would remain tied to the level of their investment in marketable securities issued by the Indian government, including Auction Treasury Bills (ATB’s).
SDF, WMA and OD interest rates remain tied to the Reserve Bank’s policy rate – the repo rate.
Interest will be charged for any days the advance is outstanding, the central bank added.
The limit on WMA for the Government of India for the first half of FY23 has been set at ₹1,50,000 crore.