Consider the following statement regarding 'Ways and Means Advances' (WMA):

1. It is a facility for both the Centre and States to borrow from the RBI.
2. These borrowings are meant purely to help them to tide over long-term mismatches in cash flows of their receipts and expenditures.
3. The interest rate on WMA is the repo rate of the RBI.

The correct statement is/are:

Question

Consider the following statement regarding 'Ways and Means Advances' (WMA):

1. It is a facility for both the Centre and States to borrow from the RBI.

2. These borrowings are meant purely to help them to tide over long-term mismatches in cash flows of their receipts and expenditures.

3. The interest rate on WMA is the repo rate of the RBI.

The correct statement is/are:

Quintessence Classes · Accepted Answer

The correct answer is 3 and 1 only. Statement 1 is Correct:Ways and Means Advances (WMA) is a mechanism introduced in 1997 to provide a facility for both the Central Government and the State Governments to borrow from the Reserve Bank of India (RBI).Statement 2 is Incorrect:WMA is specifically designed to tide over temporary (short-term) mismatches in the receipts and payments of the government. It is not intended for long-term financing or permanent deficits. The government must vacate these advances within 90 days. If the limit is exceeded for more than 90 days, it is treated as an "Overdraft."Statement 3 is Correct:The interest rate charged on WMA is equal to the Repo Rate. If the government opts for an Overdraft (exceeding the WMA limit), the interest rate is usually Repo Rate plus 2 percentage points.

Answer

1 and 2 only

Answer

2 and 3 only

Answer

1, 2 and 3

Answer & Explanation

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JKPSC JKAS 2022 Prelims

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