Government Hasn’t Borrowed From RBI This Fiscal Due To Positive Balance

Government Hasn't Borrowed From RBI This Fiscal Due To Positive Balance

Government has not yet availed the Ways and Means Advances facility of RBI in this fiscal

Government has not borrowed a single rupee in terms of loan from Reserve Bank of India (RBI) for the current fiscal 2021-22 as of now, since it has “positive” balance in its account.

Known as “Ways and Means Advance” (WMA) as per the RBI Act, the loan facility is provided to the government on a temporary basis by the central bank to meet its mismatches between expenditure and flows of receipts.

According to sources, the WMA facility has not been availed for the current financial year, owing to “continuous positive balance in government’s account”, even though it has been fixed at Rs 1.70 lakh crore for 2021-22.

RBI provides central government with the WMA facility as temporary finance for a period of 90 days. When the limit of WMA is exceeded, the overdraft is given for periods not exceeding 10 consecutive working days.

RBI has the authority to revise the limit at any time after consultations with the government and after considering the prevailing circumstances.

What is the interest rate for WMA and Overdraft?

While the interest rate for WMA is the prevailing repo rate, which is currently 4 per cent, for overdraft the interest rate is 2 per cent above the repo rate, i.e. 6 per cent.

Incidentally, government had availed the WMA and overdraft facility worth Rs 9,55,243 crore for 2018-19, while for 2019-20 it had taken Rs 11,79,582 for the same purpose. In 2020-21 the government had taken Rs 3,98,990 crore as WMA and overdraft.

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