WMA limit for H1 2020-21 at Rs 1.2 lakh crore: highest so far

The virus is stretching most things under the sun.

Just before the start of the new financial year, the RBI along with government announces WMA (Ways and Means Advances) limits. Anything over the limit becomes an overdraft.  The limit for H1 2020-21 is placed at Rs 1.2 lakh crore:

It has been decided, in consultation with the Government of India, that the limits for Ways and Means Advances (WMA) for the first half of the financial year 2020-21 (April 2020 to September 2020) will be ₹ 1,20,000 crore.

The Reserve Bank may trigger fresh floatation of market loans when the Government of India utilises 75 per cent of the WMA limit.

The Reserve Bank retains the flexibility to revise the limit at any time, in consultation with the Government of India, taking into consideration the prevailing circumstances.

The interest rate on WMA/overdraft will be:

    1. WMA: Repo Rate
    2. Overdraft: Two percent above the Repo Rate

This is the highest limit since 2004-05 (the period till which I could collect the data).

 

 

 

 

 

 

 

 

 

This is not so much a problem. The bigger problem is the constant use of WMA window by the Government, as discussed several times on this blog.  It would have been much better if the Government also announced some plan of using WMA going forward.

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