The government is yet to take advantage of RBI’s Ways and Means Advances facility in the current financial year.
The government has so far not borrowed a single rupee as loan from the Reserve Bank of India (RBI) for the current financial year 2021-22, as it has a “positive” balance in its account.
Known as “Ways and Means Advances” (WMA) as per the RBI Act, credit facilities are provided by the central bank to the government on a temporary basis to meet the mismatch between the flow of expenditure and receipts.
According to sources, due to “continuous positive balance in the account of the government”, the WMA facility has not been availed for the current fiscal, even though it has been fixed at Rs 1.70 lakh crore for 2021-22.
RBI provides WMA facility to the central government in the form of temporary finance for a period of 90 days. When the WMA limit is exceeded, the overdraft is granted for a period not exceeding 10 consecutive working days.
RBI reserves the right to revise the time limit at any time after consultation with the Government and taking into consideration the prevailing circumstances.
What is the interest rate for WMA and Overdraft?
While the interest rate for WMA is the prevailing repo rate, which currently stands at 4 per cent, the interest rate for overdraft is 2 per cent higher than the repo rate, i.e. 6 per cent.
Incidentally, the government had availed WMA and overdraft facility of Rs 9,55,243 crore for 2018-19, while it had taken Rs 11,79,582 for the same purpose for 2019-20. In 2020-21, the government had taken Rs 3,98,990 crore as WMA and overdraft.
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