RBI revises WMA scheme

Mumbai, Apr 4 (UNI) Reserve Bank of India (RBI) today announced a revision in the scheme of Ways and Means Advances (WMA) for the state government for the current fiscal year (FY 07).

As per the revised formula, the total normal WMA limits for FY 07 works out to Rs 9,875-crore, as against the present limit of Rs 8,935 crore, representing an increase of Rs 940-crore (10.50 per cent).

The rate of interest on WMA will be at the current repo rate of 6.5 per cent for the period of one to ninety days and 1 per cent above the repo rate for the period beyond 90 days.

These limits would be reviewed every year and the decision to modify it will be taken by the RBI in the light of the emerging situation, a RBI release issued here today said.

However, there is no change in the existing special WMA scheme except with regard to the interest rate on such advances like investment of the states' consolidated sinking fund (CSF) and guaranteed redemption fund (GRF).

The sepcial WMA scheme will continue to be linked to the investment made by the state government in the Union government's securities and treasury bills. An uniform margin of five per cent will be applied on the market value of the securities for determining the operating limit of special WMA.

The state will have to avail of special WMA limit first before seeking accommodation under the normal WMA limit. The rate of interest applicable to special WMA will be one per cent below the repo rate as against one per cent below the bank rate as at present.

Similarly, the present scheme of maintaining balance with the RBI will continue and there will be no change in the minimum balance amount to be maintained by the state government, the release said.

There is also no change in the existing overdraft regulation scheme except in respect of interest charge thereon, the release said.

Accordingly, as per the scheme, a state can be in overdraft for 14 consecutive working days whereafter Central bank will stop payments in respect of the concerned state.

No state government will be allowed to be in overdraft for more than 36 working days in a quarter, the release stated.

The rate of interest on overdraft will be up to 100 per cent of the normal WMA limit.

RBI advised all state governments to put in place a monitoring mechanism to avail WMA so that they are in a position to take remedial measures to avoid emergence of overdraft, particularly in cases where they avail WMA in excess of 70 per cent of the normal limit.

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