Covid-19: RBI extends overdraft, WMA relief to States by another six months

The Reserve Bank of India extended the relaxation in the overdraft facility and ways and means advances availed by States by another six months.

New Delhi: The Reserve Bank of India Tuesday extended the relaxation in the overdraft facility and ways and means advances availed by States by another six months.

According to a well laid out criteria, States avail loans, advances (ways and means advances) and overdraft facility from the Reserve Bank to address any mismatch in their cash flow. It is a particularly useful tool, which helps States in timely payment of salary and wages and in meeting other exigencies.

The relaxation offered by the Reserve Bank to States and UTs in terms of ways and means advances and OD facility were set to expire on September 30 but the Reserve Bank decided to extend it by another six months as the pandemic has shown no sign of abating.

“On a review, it has been decided to extend the above-mentioned measures announced on April 17, 2020 and April 7, 2020 with regard to increase in WMA Limits of States and UTs and OD regulations, respectively, for a further period of 6 months till March 31, 2021,” the Reserve Bank said in a statement.

The RBI said all other conditions would remain unchanged.

RBI lends helping hand to States, UTs

Following the imposition of a nationwide lockdown in March this year to slow down the community spread of the Covid-19 virus, the Reserve Bank relaxed the overdraft criteria for States as they have been facing cash crunch due to the adverse economic impact of Covid-19 global pandemic, which also required them to spend more on healthcare and other relief measures.

With effect from April 7, the Reserve Bank increased the number of days from 14 to 21 for which a State or Union Territory can avail the RBI’s overdraft facility. It also increased the number of days from 36 to 50 working days in a three-month period when States can be on overdraft.

On April 17, the Reserve Bank also increased the ways and means advance (WMA) limit of States by 60% over and above the limit applicable to them as on March 31 this year.

The RBI said these measures are aimed at providing greater comfort to States and Union Territories as they fight Covid-19 global pandemic. The highly infectious SARS-CoV-2 virus has killed over 96,000 people in the country and over one million people worldwide.

(Article by Krishnanand Tripathi)