We know that RBI works as a banker to state governments by agrrement. But there is no fixed minimum reserve balance for state governments .All state governments are required to maintain a minimum reserve balance with RBI , but it depend upon size of economy of the state and its budget.
However there are times , when there is a temporary mismatch in cash flow of the receipts and payments of the state governments . To handle this mismatch there is WMA scheme / facility which refer to Ways And Means Advances.
However there are times , when there is a temporary mismatch in cash flow of the receipts and payments of the state governments . To handle this mismatch there is WMA scheme / facility which refer to Ways And Means Advances.
- RBI makes WMA to the state governments for a period of 90 Days.
- If state government take WMA against the collateral government securities , it is called special WMA.
- If there are not against the security, then they are provided WMA based upon the three-year average of actual revenue and capital expenditure of the state . This is called normal WMA.
- WMA If exceeds it is called overdraft.
