Panel proposes raising RBI's ways and means advances corpus by 11.2% to Rs 67,839 crore

Kolkata: A panel to review Reserve Bank of India's liquidity support to state government through ways and means advances (WMA) has proposed increasing the corpus by 11.2% to Rs 67,839 crore even as it favours state-wise limits based on their revenue receipts.

The panel has also recommended an annual review of the WMA corpus capping annual upward revision at 4%. The extent of upward revision could be based on the last three years of accounts while there would be no reduction in the existing limit.

The aggregate borrowing limit under the WMA scheme for all state governments and union territories combined is Rs 61,008 crore at present, effective January 9, 2026.


"Considering the growing budget size of the states, which could lead to higher liquidity support requirements from the Reserve Bank, the committee is of the view that there is a case for increasing the WMA limits of the states," the panel headed by Karnataka's former additional chief secretary ISN Prasad said in a report.

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RBI released the report Tuesday.

The committee, formed on April 30 this year, suggested cutting continuous overdraft days from 14 to 10 and quarterly overdraft limit days from 36 to 30 to disincentives taking overdrafts, while proposing increasing the SDF limit against the eligible investments held in CSF from the existing to 75% from 50%.

The RBI gives liquidity support to state governments and union territories through WMA window to tide over any mismatch in their receipts and payments. The central bank also provides collateralised liquidity support through Special Drawing Facility (SDF) against states' contributions in Consolidated Sinking Fund (CSF) or Guarantee Redemption Fund (GRF) and investments in Auction Treasury Bills.

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State governments use the SDF window first, followed by WMA. Once the WMA limit is exhausted, the overdraft facility gets triggered.

Highlighting that some states remain over-dependent on RBI for liquidity support while a few maintains much higher cash balance to avoid emergency borrowing, the Prasad committee finds it appropriate to fix the state-wise WMA limits, based on their revenue receipts as compared to total expenditure.

The report also said that in case the corpus of CSF/GRF exceeds 5% of state’s outstanding marketable debt or guarantees, the state may be allowed to avail liquidity support against the excess CSF/GRF balances at a rate, higher than that is applicable for SDF, which may be decided by the central bank.