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Informist, Tuesday, Sept. 29, 2026

 

--RBI report: Annual revision in state-wise WMA limit may be capped at 4% 
--RBI report: May undertake annual exercise of revising states' WMA limit 
--RBI report: Committee advises revising state WMA limit to INR 678.39 bln 
--RBI releases report of committee on ways and means advances to states 

 

NEW DELHI – A committee formed by the Reserve Bank of India has recommended revising the aggregate ways and means limit for states to INR 678.39 billion from the existing limit of INR 610.08 billion, up 11.2% over the current limit. The central bank may consider undertaking an annual exercise of revising the WMA limits using the methodology suggested by this committee, RBI said in a report. 

 

"Considering the likely enhancement in SDF (special drawing facility) limits due to increase in size of their corpus on account of interest accrued on the invested Government securities, the annual 

upward revision in state-wise WMA limits may be capped at four per cent," the report said. "At the same time, it may be ensured that the revised limit of any state is not set lower than its existing WMA limit."

 

The recommendation was made by the committee formed by RBI earlier this year, under the chairmanship of I.S.N. Prasad, former additional chief secretary of Karnataka. Other members of the committee included finance secretaries of six states representing different regions of the country, a representative of the public finance-state finance division from the finance ministry's Department of Expenditure, and a fiscal expert from the National Institute of Public Finance and Policy. RBI's Internal Debt Management Department provided secretarial and research support to the committee.

 

The ways and means advances is a short-term facility provided by the central bank to tide over temporary mismatches in the receipts and payments of the central and state governments. The limits for financial accommodation extended by the RBI to state governments and Union territories through special drawing facility, ways and means advances, and overdraft schemes were last revised on Jun. 28, 2024. Thereafter, in January, the WMA limit for National Capital Territory of Delhi was fixed at INR 8.90 billion.

 

The panel in its report noted that there has been a significant decline in the usage of the overdraft facility by the states in recent years. "Accordingly, the maximum number of consecutive working days a state can remain in overdraft may be reduced from 14 to 10. Also, the maximum number of working days a state can be in overdraft in a calendar quarter may be brought down from 36 to 30," the report said.

 

It also pitched for the RBI to extend the temporary relaxation given in January with respect to the Special Drawing Facility against the Consolidated Sinking Fund and Guarantee Redemption Fund beyond the end of September. "To incentivise the states towards making voluntary contributions in these funds for reaching the desirable level, Special Drawing Facility limit against the investments held in Consolidated Sinking Fund may be increased from the existing 50% to 75," it added.

 

The concessional liquidity support from the RBI under the Special Drawing Facility may be limited to Consolidated Sinking Fund and Guarantee Redemption Fund balances up to 5% of state's outstanding marketable debt and guarantees. "In case the corpus of CSF/GRF exceeds 5% of the state's outstanding marketable debt/guarantees, it may be allowed to avail liquidity support against the excess CSF/GRF balances at a rate, higher than that is applicable for SDF, which may be decided by the RBI," the panel suggested.

 

The RBI should also keep the interest of states in mind while deciding on the interest rate charged on various financial accommodation facilities provided to states, the report said. The panel also urged states that have not yet become members of the Consolidated Sinking Fund and Guarantee Redemption Fund framework to join at the earliest.

 

The report said that the next committee to review the WMA to state governments should be set up post the release of the report of the Seventeenth Finance Commission. "As the devolution formula recommended by the Finance Commission can have a significant bearing on the fiscal and liquidity position of the states, the timing of review of WMA scheme may be aligned with the Finance Commission report submission cycle," it said.  End

 

Reported by Priyasmita Dutta and Sagar Sen 

Edited by Deepshikha Bhardwaj

 

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