With reference to Ways and Means Advances consider following statements It is a facility for bo...........

Economic Affairs Money Supply and Monetary Policy

With reference to Ways and Means Advances, consider following statements

It is a facility for both the Centre and states to borrow from the RBI and these borrowings are meant purely to help them to tide over temporary mismatches in cash flows of their receipts and expenditures.
It is intended only to tide over temporary mismatches in cash flow of receipts and payments of the government.
The interest rate on WMA is the RBI’s repo rate, which is basically the rate at which it lends short-term money to banks.

Select the correct statement.

1&2 only

2&3 only

1&3 only

All of the above

Simply put, it is a facility for both the Centre and states to borrow from the RBI. These borrowings are meant purely to help them to tide over temporary mismatches in cash flows of their receipts and expenditures.
In that sense, they aren’t a source of finance per se. Section 17(5) of the RBI Act, 1934 authorises the central bank to lend to the Centre and state governments subject to their being repayable “not later than three months from the date of the making of the advance”.
The interest rate on WMA is the RBI’s repo rate, which is basically the rate at which it lends short-term money to banks. That rate is currently 4.4%.

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