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Ways and means advances is a mechanism used by RBI under its credit policy to provide to States banking with it, to help them tide over temporary mismatches in the cash flow of their receipts and payments.
Under this scheme, a government can avail itself of immediate cash from the RBI.
The increased limit for WMAs will help the states plan their market borrowing programmes better while ensuring greater containment and mitigation efforts by the states.
The WMA is to be repaid after 90 days. The interest rate for WMA is currently charged at the repo rate.
The governments are, however, allowed to draw amounts in excess of their WMA limits. The interest on such overdraft is more than the repo rate. Further, no state can run an overdraft with the RBI for more than a certain period.
