India’s central bank has raised the overall limit of a special short-term borrowing facility for state and union territory (UT) governments from July 1, taking into account their spending data in recent years.
The revised overall Ways and Means Advances (WMA) limit for states and union territories will be Rs 601.18 billion ($7.21 billion), from the current limit of Rs 470.10 billion, the Reserve Bank of India (RBI) said in a press release on Friday.
The RBI provides AMM to states banking with it to help them overcome temporary imbalances in their revenue and payment cash flows.
The amendment to the WMA is also based on the recommendations of a group constituted by the RBI, including some state finance secretaries, the central bank said.
Meanwhile, the RBI said it has reduced the borrowing limit of states through the Special Drawing Facility (SDF).
The facility will remain linked to the amount of their investments in marketable securities, issued by the government, the RBI said in the statement.
States can now borrow a maximum of 50% or less of the outstanding funds as of the last date of the preceding second quarter.
They can also use the current balance of the Consolidated Sinking Fund or the Guarantee Redemption Fund, reserve funds established by the central bank with contributions from States to service the debt.
($1 = 83.3330 Indian rupees) (Reporting by Siddhi Nayak; Editing by Sohini Goswami)
