Increased WMA limit helps State government balance accounts

HYDERABAD: THE recent decision of the Reserve Bank of India (RBI) to increase the Ways and Means Advances (WMA) limit of States by 60 per cent helped the Telangana government overcome the temporary mismatches between receipts and expenditure caused by the Covid-induced lockdown. 

According to the information provided by the apex bank in reply to an RTI query, the State utilised Rs 3,485.16 crore through WMA till May 31 this fiscal. It was under financial stress in April and May due to the lockdown and utilised the WMA, but was cautious not to use the overdraft (OD) facility till May 31. This is because, the interest rate on WMA is equivalent to the repo rate, but is higher on OD. 

However, ‘rich’ Telangana utilised the OD facility for three consecutive years between 2017-18 and 2019-20. It took the highest OD of Rs 7,005.1 crore in 2018-19, according to the information sought by activist Sudheer Jalagam. The RTI reply stated that the State governments are provided short-term financial accommodation by the RBI through WMA. When the WMA limit is exceeded, the OD facility is provided. 

“WMA and OD are for a short term and carry a lower rate of interest. They are not part of the Fiscal Responsibility and Budget Management Act (FRBM) because they get paid within the year itself. In fact, the RBI encourages States to use these because they are cheaper working capital loans. It is, in fact, part of prudent fiscal management and not at all a sign of weakness,” a source in the Finance Department told Express. But the source differed with the figures provided by the RBI on the WMA and OD. The Comptroller and Auditor General’s (CAG) figures, which are final, should be taken into consideration, the source said. The official provided the CAG figures.