WAYS AND MEANS ADVANCES (WMA)

WAYS AND MEANS ADVANCES (WMA) :
- Under the RBI Act the Reserve Bank provides Ways and Means Advanced to the State Governments to help tide over the temporary mismatches in the cash flow of their receipts and payment.
- While normal WMAs are clean advances, special WMAs are secured advances provided against the security of Government of India dated securities.
- The normal WMAs are revised every year. No state government is allowed to have an over draft position for more than a stipulated number of working days.
- If the overdraft persists beyond the stipulated period the RBI suspends the payments.
- The interest rate on WMA has been linked to repo rate.
- Since the abolition of the automatic creation of ad-hoc treasury bills in 1997 a system of ways and means advances to the Union Government was introduced to meet the temporary mismatch between the receipts and payments of Union Government.
- These loans are repayable within three months from the date the advance in terms of the Central government with RBI in respect of the maximum amount and rate of interest.