The Reserve Bank of India (RBI) has extended the interim relaxations it made for the state governments earlier this year to ease the restrictions on their borrowing limits, given the outbreak of the Covid-19 pandemic.
Accordingly, the timeline for state and Union Territory (UT) governments to avail increased provisions via the ‘ways and means advances’ (WMA) limit has been extended from September 30, 2020 to March 31, 2021.
On April 17, the RBI had announced an increase in WMA limit of the states or UTs by 60 per cent over and above the level as on March 31, 2020.
In financial parlance, the ‘ways and means advances’ (WMA) is a mechanism used by the RBI, under its credit policy, to provide advances to states, banking with it, to tide over temporary mismatches in the cash flow of their receipts and payments.
This is repayable in each case, not later than three months from the date of making the advance.
Similarly, the relaxations in overdraft (OD) regulations has also been extended till March 31, 2021.
The OD regulations relaxation was given in order to provide flexibility to state governments to tide over their cash flow mismatches, with effect from April 7.
Consequently, the relaxation increased the number of days for which a state or UT can be in overdraft continuously to 21 working days from 14 working days, and the number of days for which a state or UT can be in overdraft in a quarter to 50 working days from 36 working days.
“Both these relaxations are currently available till September 30.
“On a review, it has been decided to extend the above-mentioned measures announced on April 17, 2020 and April 7, 2020 with regard to increase in WMA Limits of states/UTs and OD regulations, respectively, for a further period of 6 months till March 31, 2021. All other stipulations remain unchanged,” the Reserve Bank said in a statement.
