Mumbai: The Reserve Bank today capped the ways and means advances limit for the central government in the first half of the new financial year (FY 2015) at Rs 35,000 crore per week.
The Reserve Bank may trigger fresh flotation of market loans when the government utilises 75 per cent of the ways and means advances (WMA) limit, the central bank said in a notification. The second half limit will be fixed in September, it added.
The Reserve Bank would retain the flexibility to revise the limits at any time, in consultation with government, taking into consideration the prevailing circumstances.
The interest rate on WMA/overdraft will be 2 per cent above the repo rate, the central bank said. The minimum balance required to be maintained by the government with the Reserve Bank will not be less than Rs 100 crore on Fridays, on the date of closure of government's financial year and on June 30, i.e., closure of the annual accounts of the RBI and not less than Rs 10 crore on other days, the notification said.
As per the provisions of the agreement dated March 26, 1997 between the government and the RBI, overdrafts beyond 10 consecutive working days will not be allowed. The government uses WMA to manage its short-term liquidity which may arise during the interregnum of its planned market borrowing.