The government did not borrow from RBI This financing due to a positive balance in the account

Government did not borrow from RBI This financing due to positive balance

The government has yet to use the RBI Ways and Means Advance facility this fiscal

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

Called the “Ways and Means of Advancement” (WMA) under the RBI Act, the temporary loan is provided by the central bank to the government to meet a mismatch between expenditures and revenue streams.

According to the sources, the WMA facility has been dormant for the current financial year, due to a “persistent positive balance in the government account”, although it has been fixed at Rs 1.70 lakh crore for period 2021-22.

The RBI provides the central government with a WMA facility as temporary financing for a period of 90 days. When the WMA limit is exceeded, an overdraft is issued for a period not exceeding 10 consecutive business days.

The RBI reserves the right to modify the limit at any time after consultation with the government and after reviewing the applicable circumstances.

What is the interest rate for WMA and Overdraft?

While the interest rate for WMA is the popular repo rate, currently 4%, for overdraft the interest rate is 2% higher than the repo rate, i.e. 6%.

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

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