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The Reserve Bank of India (RBI), in consultation with the Government of India (GoI), has set the Ways and Means Advances (WMA) limit for the Government for the second half of the financial year 2020-21 (October 2020 to March 2021) lower at ₹1.25 lakh crore against ₹2 lakh crore in the first half (April 2020 to September 2020).
The RBI helps the Government overcome temporary mismatches in receipts and payments via WMA. The interest rate on WMA is the repo rate (currently at 4 per cent). In case the Government resorts to overdraft, the interest rate is 2 per cent above the repo rate.
The RBI said it may trigger fresh floatation of market loans when the Government of India utilises 75 per cent of the WMA limit.
The central bank, in a statement, said it retains the flexibility to revise the limit at any time, in consultation with GoI, taking into consideration the prevailing circumstances.
On April 20, 2020, the RBI, in consultation with GoI, had upped the limit for WMA of the Government for the remaining part of the first half of the FY21 (April 2020 to September 2020) from ₹1.20 lakh crore to ₹2 lakh crore.
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