RBI Revises Ways and Means Advances Scheme for State Govt’s

By | February 2, 2016
(Last Updated On: February 2, 2016)

Source : Reserve Bank of India

Date : Jan 29, 2016

Based on the recommendations of the Advisory Committee on Ways and Means Advances (WMA) Scheme for the State Governments, 2015 (Chairman: Shri Sumit Bose), the Reserve Bank of India (RBI) has revised the WMA scheme. The revised scheme for 2015-16 is as under:

WMA Limits

1) As per the revised formula, the WMA quantum works out to ₹ 32,225 crore as against ₹ 15,360 crore for all the States and the State-wise limit is in the Annex.

Special Drawing Facility (SDF) Limits

2) The facility of availing of SDF continues to be linked to the quantum of investments in the GoI securities including Auction Treasury Bills (ATBs). The SDF will be available before availing of WMA.

3) Consolidated Sinking Fund (CSF) /Guarantee Redemption Fund (GRF) Investments and SDF Eligibility

  1. The incremental investments in CSF/GRF will continue to be the determining factor for the SDF limit.
  2. As an incentive, all incremental investments (at present SDF restricted upto WMA limit) will be allowed for availing SDF without any limit.
  3. As the CSF facilitates availing of SDF at times of temporary cash flow mismatches and to repay any liabilities at times of need, few remaining States may consider joining the scheme.

Interest Rates on SDF and WMA

4) As the Repo rate is the policy rate, the interest rate on SDF and WMA will continue to be linked with the policy rate of the RBI, i.e., Repo rate. The interest will be charged for all the days of outstanding of SDF/WMA.

5) As the SDF is provided against the collateral of the State Governments’ investments, it will continue to attract Repo rate minus one per cent for all the days it is outstanding.

6) The WMA will generally be restricted upto a maximum of three months from the date of making the advance. The interest rate on WMA will be the Repo rate. In case WMA outstanding continues for more than three months from the date of such advance, a higher interest of Repo rate plus one per cent will be charged.

Overdraft (OD) Facility

7) There is no change in the existing Overdraft Regulation Scheme. The existing scheme provides that :

  1. A State can be in overdraft for 14 consecutive working days. In case the overdraft continues in the State’s account beyond 14 consecutive working days, the RBI and its agencies shall stop payments in respect of the concerned State Government.
  2. If the overdraft exceeds 100 percent of the WMA limit for five consecutive working days for the first time in a financial year, the RBI will advise the State to bring down the overdraft level within the 100 per cent of WMA limit. If, however, such irregularity occurs on a second or subsequent occasion in the financial year, the RBI will stop payments notwithstanding clause (i) above, which permits the State overdraft upto 14 consecutive working days.
  3. No State Government will be allowed to be in overdraft for more than 36 working days in a quarter. If this is not adhered to, payments will be stopped, irrespective of clauses (i) and (ii) above.
  4. The rate of interest on overdraft will be as under:

    (a) Overdraft up to 100 per cent of WMA limit – two per cent above the Repo rate, and

    (b) Overdraft exceeding 100 per cent of the WMA limit – five per cent above the Repo rate.

Implementation and Review

8) The revised limits will be implemented effective from February 1, 2016. These limits would continue for two years.

9) A review will be undertaken by the RBI in 2017-18 when final expenditure numbers for FY 2015-16 will be available. Thus, the WMA limits for FY 2018-19 will be based on average base of three years total expenditure upto 2015-16 net of lotteries, revenue deficit and power bond expenses, if any. Next revision of WMA scheme may be effected in 2020-21 taking into account the then fiscal positions of the States and the road map likely to be deliberated in the 15th Finance Commission Report.


The RBI as the banker to the State Governments provides financial accommodation to the States banking with it through agreement to tide over temporary mismatches in the cash flow of their receipts and payments as WMA. They are intended to provide a cushion to the States to carry on their essential activities and normal financial operations. In addition to WMA, SDF (nomenclature changed from Special WMA in 2014) has also been in operation since April 1953. When the advances to the State Governments exceed their SDF and WMA limits, Overdraft (OD) facility is being provided.

Three Advisory Committees were constituted in the past under the chairmanship of (i) Shri B.P.R. Vithal (1998), (ii) Shri C. Ramachandran (2003), and (iii) Shri M.P. Bezbaruah (2005), in addition to Informal Group of State Finance Secretaries (2000). The present Committee is the fourth in this series and was constituted based on the discussions held in the State Finance Secretaries (SFS) conference held in August 2014. For the first time, the Committee included six State Finance Secretaries and Additional Secretary, PF-I, GoI as Members in addition to one external fiscal experts Dr. Rathin Roy, Director, National Institute of Public Finance and Policy. The Secretarial and research support to the Committee was provided by the Internal Debt Management Department of the RBI.

Annex: Revised WMA Limits
(₹ Crore)
Sl. No.StatesExisting LimitRecommended Limit% Increase
1Andhra Pradesh770.001,510.0096.1
2Arunachal Pradesh97.50195.00100.0
9Himachal Pradesh285.00550.0093.0
10Jammu and Kashmir472.50880.0086.2
14Madhya Pradesh690.001,600.00131.9
23Tamil Nadu1,095.002,475.00126.0
26Uttar Pradesh1,530.003,550.00132.0
28West Bengal817.501,895.00131.8
Total (All States)15,360.0032,225.00103.7

Ajit Prasad
Assistant Adviser

Press Release : 2015-2016/1793

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