Definition
Ways and Means Advances
Ways and Means Advances are short-term, temporary loans the RBI extends to the central and state governments to tide over mismatches in their cash flows.
Government receipts and payments rarely line up day to day. To cover these gaps, the RBI provides Ways and Means Advances (WMA) — short-tenure credit that must be repaid within a set period and stays within agreed limits. It is meant strictly for temporary liquidity, not deficit financing.
If a government exceeds its WMA limit it can take an overdraft, but only for a limited number of days, after which it must restore balance. WMA limits for states are reviewed periodically and were raised during the pandemic to give them more breathing room.
Related terms
- Market Borrowing (Dated Securities)Market borrowing is the money the government raises by issuing dated securities — long-term bonds — to investors to finance its fiscal deficit.
- Treasury BillsTreasury Bills are short-term government securities issued at a discount and redeemed at face value, used to manage the government's temporary cash needs.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.