The Reserve Bank of India after consultation with the government has increased the Ways & Means Advances (WMA) limits of the central government by a massive 66 percent since the last announcement on March 31. The government’s new WMA limit stands at Rs 2 lakh crore against 1.20 lakh crore announced last month.
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According to the RBI, “To tide over the situation arising from the outbreak of the COVID-19 pandemic, it has been decided, in consultation with the Government of India, that the limit for Ways and Means Advances (WMA) for the remaining part of first half of the financial year 2020-21 (April 2020 to September 2020) will be revised to Rs 2,00,000 crore.”
WMA is a short-term borrowing arrangement between the central bank and the union and state governments.
The WMA limit for the union government was set at Rs 75,000 crore during H1FY19, and with Monday’s hike the limit has been upped to thrice that of H1FY19.
With the union government treating the current quarter as a write off in terms of economic activity and revenues, the government’s dependence on short-term off-market borrowings is likely to be high.
Higher WMA also indicates the central government is not thinking of a larger market borrowing just yet. And nor has it planned to monetise its deficit by the RBI yet. Earlier, a government official told CNBC-TV18: “The RBI is not permitted to buy government securities.”
The Reserve Bank of India after consultation with the government has increased the Ways & Means Advances (WMA) limits of the central government by a massive 66 percent since the last announcement on March 31. The government’s new WMA limit stands at Rs 2 lakh crore against 1.20 lkh crore announced last month.
According to the RBI, “To tide over the situation arising from the outbreak of the COVID-19 pandemic, it has been decided, in consultation with the Government of India, that the limit for Ways and Means Advances (WMA) for the remaining part of first half of the financial year 2020-21 (April 2020 to September 2020) will be revised to Rs 2,00,000 crore.”
WMA is a short-term borrowing arrangement between the central bank and the union and state governments.
The WMA limit for the union government was set at Rs 75,000 crore during H1FY19, and with Monday’s hike the limit has been upped to thrice that of H1FY19.
With the union government treating the current quarter as a write off in terms of economic activity and revenues, the government’s dependence on short-term off-market borrowings is likely to be high.
Higher WMA also indicates the central government is not thinking of a larger market borrowing just yet. And nor has it planned to monetise its deficit by the RBI yet. Earlier, a government official told CNBC-TV18: “The RBI is not permitted to buy government securities.”
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