The Reserve Bank of India (RBI) has announced a significant increase in the aggregate limit for the Ways and Means Advances (WMA) facility available to state governments and union territories (UTs). Effective from July 1, the revised WMA limit is set at Rs 601.18 billion ($7.21 billion), up from the previous limit of Rs 470.10 billion. This decision takes into account the expenditure data of states and UTs over recent years.
The WMA facility is a special short-term borrowing mechanism provided by the RBI to assist state governments in managing temporary mismatches in their cash flows of receipts and payments. This adjustment in the WMA limit follows recommendations from a group constituted by the RBI, which included finance secretaries from select states.
In addition to the WMA adjustments, the RBI has announced a reduction in the borrowing limit for states through the Special Drawing Facility (SDF). This facility will continue to be tied to the amount of states’ investments in marketable securities issued by the government. Under the new regulations, states can access up to 50 percent or less of the outstanding balance of their funds as of the last date of the second preceding quarter. They can also utilize the current balance held in the Consolidated Sinking Fund or Guarantee Redemption Fund, which are reserve funds established by the central bank with contributions from the states for debt servicing.
This move is expected to provide greater financial flexibility to states and UTs while ensuring prudent fiscal management. The increase in the WMA limit reflects the RBI’s commitment to supporting state governments in managing their finances effectively amid evolving economic conditions.
