## Central Government 1. [April 10, 1985](RBI_Group-Committee_19850410_Report%20of%20the%20Committee%20to%20Review%20the%20Working%20of%20the%20Monetary%20System_Chairman-Sukhamoy%20Chakravarty.pdf.pdf) - The Committee to Review the Working of the Monetary System under the chairmanship of Prof. Sukhamoy Chakravarty set up by the RBI in 1982, submitted its report in 1985 and suggested reducing the monetary expansion through the process of monetisation of fiscal deficit, through an agreement between the Reserve Bank and the Government 2. 12 years later, the automatic monetization of deficit through the issuances of ad hoc [Treasury Bills (T-Bills)](Treasury%20Bills%20(T-Bills).md) was ended. 3. 1994-95 - In Union Budget, govt announced an end to the practice of financing the central government’s budget deficit through the creation of ad hoc T-bills without any limit. 4. 1994-1997 - The size of net issue of ad-hoc T-bills were kept fixed for the 3 years 5. Jan 25, 1997 - A committee which was formed by the government to examine the process of transitioning from ad-hoc T-bills to WMA for centre, submitted its report on 25 January 1997. 1. [==Box 3.4 Committee to Examine the Modalities of Phasing out of Ad hoc Treasury Bills](RBI_History%20of%20The%20Reserve%20Bank%20of%20India%20(1997-2008)_Volume%20V.pdf#page=107&selection=3,0,7,14) in History of The Reserve Bank of India (1997-2008) Volume V== 6. [Feb 28, 1997](https://www.indiabudget.gov.in/doc/bspeech/bs199798.pdf) - Union Finance Minister in his Budget Speech for 1997-98: 1. The system of ad hoc Treasury Bills to finance the budget deficit will be discontinued with effect from April 1, 1997. A scheme of ways and means advances (WMA) by the RBI to the Central government is being introduced to accommodate temporary mismatch es in the government's receipts and payments. This will not be a permanent (regular) source of financing the government's deficit (but only cover day-to-day mismatches). 7. March 26, 1997 - The Government of India and the Reserve Bank of India signed an agreement to formally put in place. 8. [April 1, 1997](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=18542) - A scheme of Ways and Means Advances (WMA) by the Reserve Bank of India (RBI) to the Government of India (GOI) was introduced to accommodate temporary mismatch es in Government receipts and payments. 1. ==This ended the automatic monetization of budget deficit, and allowed RBI to formulate and implement/conduct monetary policy with more freedom/autonomy and to ensure fiscal discipline in the govt. spending.== 2. WMA had to be cleared within a period of ninety days. 3. Amounts drawn beyond the WMA limit would be treated as overdraft, but not for more 10 consecutive working days. 4. The limit and the rate of interest on WMA and the rate of interest on Overdraft will be mutually agreed between RBI (IDMD) and Government from time to time. 9. ==[[#^7e5d71|Differences]] between the earlier scheme of monetising budget deficits through ad hocs and WMA:== 1. WMA is not a source of financing and as such will not be shown as a source of financing Budget Deficit. **It is only a mechanism to cover day-to-day mismatches in receipts and payments of the Government.** The new system implies therefore **periodic vacation of advances** made and not accumulation year after year. 2. Limits on WMA will be fixed and any excess withdrawal by Government beyond the limit will not be permissible for more than 10 consecutive working days after March 1999. 3. *In order to smoothen the transition, the Government of India was allowed to incur also an overdraft, but at an interest rate higher than the rate applicable for Ways and Means Advances (WMA). With effect from April 1, 1999 these overdrafts were allowed only for a maximum of ten working days. 4. WMA will be charged at market related interest rate. 5. RBI, at least “theoretically”, cannot print money to *directly* buy sovereign debt, at least. This is because the FRBM Act, 2003 prohibits RBI from this practice called direct monetisation. But it can provide this short term loan facility to the central and state govt. 10. ==The Reserve Bank has been extending WMA to State Governments since 1937. 11. RBI is authorised to make Ways and Means advances (WMA) to the Central and the State Governments as a banker to them in terms of section 17(5) of the RBI Act. 12. Interest Rate 1. 1997-98 (for any quarter) - As a transitional measure, the interest rate was fixed at 3 percentage points below the average of the implicit yield at the cut-off price of 91-day Treasury Bill auctions held during the previous quarter. For overdraft, the rate of interest is above the WMA rate by 2% 2. April 1, 1998 - WMA to the central govt. was provided at the Bank Rate. With this, WMA to both state and central govt was provided at the Bank Rate > [==Box 1.2 Supplemental Agreement between the Reserve Bank of India and the Government of India](RBI_Annual%20Report_1997.pdf#page=17&selection=25,0,33,30) in RBI's Annual Report-1997== ### 2006-07 1. Reserve Bank withdrew from participation in the primary issuance of Central Government securities with effect from April 1, 2006 in accordance with the FRBM Act, 2003. 2. Hence, the Ways and Means Advances (WMA) arrangements were revised from 2006-07 in consultation with the Government 1. In order to facilitate the transition necessitated by the new FRBM provisions the limits for 2006-07 were fixed on a quarterly basis instead of a half-yearly basis. 2. Interest rate were linked to Repo rate as against the Bank Rate, as repo rate reflected the short-term monetary conditions. In other words, it emerged as the reference rate for short-term. 3. [April 4, 2006](RBI_Press%20Release_20060404_Revised%20Scheme%20of%20Ways%20and%20Means%20Advances%20(WMA)%20to%20State%20Governments-2006-07.pdf) - The interest rates on WMA and overdraft for state governments were linked to the repo rate (as against the Bank Rate earlier). 4. So the interest rate on WMA was at the repo rate and that on overdraft was repo rate + 2% ### Present Form 1. Limits are fixed on half-yearly basis. 2. Interest rate for WMA is Repo rate, and for Overdrafts is Repo Rate+2% for overdrafts of 100 per cent of normal WMA limit. 3. When 75 per cent of the WMAs is utilised, the RBI would trigger fresh floatation of Government Securities >[Overview](https://rbi.org.in/scripts/FS_Overview.aspx?fn=2758) - Banker to Governments and Banks >FAQs - [RBI as Banker to Government](https://rbi.org.in/Scripts/FAQDisplay.aspx?Id=61) ## State Governments/UTs 1. 1.1 The Reserve Bank of India (RBI) acts as the debt manager and banker for 27 State Governments and the Union Territories of Puducherry and Jammu and Kashmir (J&K), while being a debt manager for the Government of Sikkim[7](https://rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=1173#FN7), in terms of the States’ agreement with RBI under Section 21 A of the Reserve Bank of India Act, 1934. 1. According to this section, the Reserve Bank may, by agreement with the Government of any State, shall undertake 1. all money, remittance, exchange and banking transactions in India, including in particular, the deposit, free of interest, of all its cash balances with the Bank; 2. and the management of public debt of, and 3. the issue of any new loans by that State. 2. In terms of Section 17 (5) of the RBI Act, the Reserve Bank makes advances (in form of Ways and Means Advances (WMA)) to State Governments to tide over temporary mismatches in the cash flows of their receipts and payments. 3. They are repayable in each case not later than three months from the date of the making of the advance’. 4. ==The Reserve Bank has been extending WMA to State Governments since 1937.== 5. The maximum amount of WMA granted by the Reserve Bank and the interest charged thereon are regulated by agreements with the State Governments as also based on the recommendations of various Advisory Committees/Groups constituted on Ways and Means Advances and Overdrafts to the State Governments. 6. There are two types of WMA, viz. 1. Normal WMA - unsecured or clean advance, which was introduced in 1937; and 2. Special WMA (now SDF) - It was instituted in 1953, and is a secured advance provided against the collateral of Central Government Securities and Treasury Bills. 3. As requested by State Governments in the SFS conference held in May 2013, the nomenclature of **Special WMA was changed to Special Drawing Facility (SDF)** since June 23, 2014, by amending the agreement with respective State Governments. 7. SDF is a collateralised facility available to the states at concessional rates against their investment in Consolidated Sinking Fund (CSF)/GRF/auction treasury bills (ATBs). 8. WMA and OD are uncollateralised facilities available at rates higher than that applicable for SDF. 9. The financial accommodation facilities available to the state governments can be availed in order of first SDF followed by WMA and OD. In other words, OD facility is also provided to a State if it exceeds its SDF and WMA limits. 10. At present, the Interest rate charged on WMA, SDF and OD is linked to the Repo Rate 11. Rate of Interest - Refer to the latest Report of the Advisory Committee on Ways and Means Advances to State Governments 12. Maximum amount of such advances by Reserve Bank and the interest charged thereon are, however, not specified in the RBI Act 1. It is set by voluntary agreements with the State Governments 2. They are based on the states’ requirements, the evolving fiscal, financial and institutional developments (economic environment), recommendations of various Committees/ Groups constituted, objectives of monetary and fiscal management. 3. The limit is revised periodically and fixed as a multiple of their respective minimum balance. 4. The idea is to discourage the States from using the facility as a normal budgetary resource. 13. RBI, as a banker to State Governments (except Sikkim), is not entitled to any remuneration for conduct of ordinary banking business 14. RBI earns from holding of States’ cash balances, free of obligation to pay interest thereon. 15. State Governments are required to maintain the mutually agreed minimum balances 16. [January 05, 2026](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=61973) - RBI entered into an agreement with the Government of National Capital Territory of Delhi (GNCTD) to carry out the general banking business of GNCTD with effect from [Jan 09, 2026](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=62011). ### Reviews of Ways and Means Advances for State Govt./UTs 1. [Jan 09, 2026](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=62011) 2. [Jun 28, 2024](https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=58187) 3. [April 01, 2022](https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=53499) 4. [Oct 8, 2021](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52379) >[Box VII.1 -Review of Financial Accommodation Facilities for the State Governments](RBI_Annual%20Report_2025.pdf#page=179&selection=176,0,176,70) in RBI's Annual Report 2025 ## Advisory Committees Constituted by RBI The WMA scheme was reviewed in the past by the following **6 advisory committees as on April , 2025.** | S. No. | Set-up Year | Chairman | | ------ | ---------------------------------------------------------------------------------- | ------------------------------------------- | | 1 | [1998](https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=4) | B.P.R. Vithal | | 2 | [2000](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=4391) | Informal Group of State Finance Secretaries | | 3 | [2003](https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/34770.pdf) | C. Ramachandran | | 4 | [2005](https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/69675.pdf) | M. P. Bezbaruah | | 5 | [2015](https://m.rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=838) | Sumit Bose | | 6 | [2019](https://m.rbi.org.in/scripts/PublicationReportDetails.aspx?ID=1173) | Shri Sudhir Shrivastava. | *The table above has the link to the reports.* ## Resources ### [[Speeches & Media Interactions|Speeches]] 1. RBI (March 8, 1997). ==Budget and RBI : New Directions==. Address By Dr. Y.V. Reddy Deputy Governor Reserve Bank of India at Administrative Staff College of India, Hyderabad on March 8, 1997 . [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=227) ^7e5d71 2. Sep 24, 2007. The Reserve Bank and the State Governments: Partners in Progress. (Address by Dr. Y.V.Reddy, Governor, Reserve Bank of India at the Madras School of Economics, Chennai on September 23, 2007). [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=355) ### [[Publications (Data Releases) & Research#Research|Research]] [Groups/Committees](Groups%20and%20Committees.md) 1. RBI. (Jan 25, 1997). Committee to Examine the Modalities of Phasing out of Ad hoc Treasury Bills. [pdf](RBI_History%20of%20The%20Reserve%20Bank%20of%20India%20(1997-2008)_Volume%20V.pdf#page=107&selection=3,0,7,14) 2. RBI. (November 25, 1998). Report of the Informal Advisory Committee on Ways and Means Advances to State Governments. [Link](https://rbi.org.in/scripts/PublicationsView.aspx?Id=235) 3. RBI. (January 22, 2003). Report of the Advisory Committee on Ways and Means Advances to State Governments. [Link](https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=301) 4. RBI. (2005). Report of the Advisory Committee on ways and means advances. 5. RBI. (April, 2006). Report of the Advisory Committee on Ways and Means Advances to State Governments. [Link](https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=464) 6. RBI. (Jan 29, 2016). Report of the Advisory Committee on Ways and Means Advances to State Governments. [Link](https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=838) 7. RBI. (May 17, 2021). Report of the Advisory Committee on Ways and Means Advances to State Governments, 2021. [Link](https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=1173) ### [[Publications (Data Releases) & Research#Publications|Publications]] 1. RBI. Annual Report-1997 and 1998. [1997](RBI_Annual%20Report_1997.pdf) | [1998](RBI_Annual%20Report_1998.pdf) ### Press Releases & Notifications 1. RBI. (March 26, 1997). System of Ways and Means Advances : [Agreement](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=18542) signed between the Government of India and the Reserve Bank of India (Press Release). 2. RBI. (2022, April 01). Review of Ways and Means Advances Scheme of State Governments/ UTs \[Press Release\]. [Link](https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=53499) 3. RBI. (2024, June 28). Review of Ways and Means Advances Scheme for State Governments/UTs \[Press Release\]. [Link](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=58187)