Money & Banking

RBI extends WMA limit relaxations for six months

Our Bureau Mumbai | Updated on September 29, 2020 Published on September 29, 2020

The Reserve Bank of India (RBI) has decided to extend the interim relaxation in WMA (Ways and Means Advances) limits and OD (overdraft) regulations for States/ Union Territories (UTs) for another six months till March 31, 2021.

Both these relaxations, which are aimed at helping States/UTs overcome short-term liquidity mismatches, are currently available till September 30, 2020. Under WMA, States/ UTs get short-term credit up to three months from the RBI to bridge temporary mismatches in cash flows.

On April 17, the RBI had announced an increase in WMA limit of the States/UTs by 60 per cent over and above the level as on March 31.

This was done to provide greater comfort to them for undertaking Covid-19 containment and mitigation measures and to enable them to plan their market borrowings.

Further, in order to provide flexibility to State governments to tide over their cash flow mismatches, the OD regulations were relaxed with effect from April 7.

Under the OD relaxation, the number of days for which a State/ UT can be in overdraft continuously was increased to 21 working days from 14 working days; and the number of days for which a State/ UT can be in overdraft in a quarter was increased to 50 working days from 36 working days.

The interest rate on WMA is the Repo rate (4 per cent).

For OD up to 100 per cent of WMA limit, the interest rate is 2 per cent above the Repo rate. For OD exceeding 100 per cent of the WMA limit, the interest rate is 5 per cent above the Repo rate.

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Published on September 29, 2020
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