Which of the following is NOT correct about Ways and Means Scheme WMS ........

Economic Affairs Planning in India

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Which of the following is NOT correct about Ways and Means Scheme (WMS)?

WMS addresses the mismatch in cash flow of receipts and payments of State governments

Advance under WMS remains valid for the period of 90 days

State governments can take advances under this scheme by providing government securities as collateral

If the allocation under WMS is exceeded by the state, it can still withdraw under overdraft facility

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Explanation:

3rd option is incorrect.
There are temporary advances (overdrafts) extended by RBI to the govt. Section 17(5) of RBI Act allows RBI to make WMA both to the Central and State Govt. Objective – to bridge the interval between expenditure and receipts. They are not a sources of finance but are meant to provide support, for purely temporary difficulties that arise on account of mismatch/shortfall in revenue or other receipts for meeting the govt. liabilities. They have to be periodically adjusted to enable use of such financing for future mismatches.