With an aim to help state governments tide over the financial problems triggered by the COVID-19 pandemic, the RBI on Tuesday extended by six months the additional flexibility provided to states to raise funds through market borrowing and overdraft. The Reserve Bank in April provided additional flexibility to states and Union Territories (UTs) to raise funds to deal with the COVID-19 crisis. The flexibility was available till September 30, 2020.
On a review, it has been decided to extend the measures announced on April 17, 2020 and April 7, 2020 with regard to increase in WMA Limits of states/UTs and overdraft (OD) regulations, respectively, for a further period of 6 months till March 31, 2021, the central bank said in a press release. With a view to provide greater comfort to state governments in undertaking COVID-19 containment and mitigation measures, and to enable them to plan their market borrowings, RBI in April had increased Ways and Means Advances (WMA) limit of states and UTs by 60 per cent over and above the level as on March 31, 2020.
WMA is temporary advances given by RBI to government to tide over any mismatch in receipts and payments. Similarly, to help state governments tide over their cash flow mismatches, RBI had relaxed the OD regulations with effect from April 7, 2020.
The central bank decided to increase the number of days for which a state/ UT can be in overdraft continuously to 21 working days from 14. Also, the number of days for which a state/ UT can be in overdraft in a quarter was increased to 50 working days from 36.
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