RBI panel recommends raising state WMA limits 11.2 percent to ₹67,839 crore
An advisory committee chaired by I S N Prasad has recommended raising the aggregate Ways and Means Advances limit for Indian states by 11.2 percent to ₹67,839 crore. The panel proposed shifting the calculation base to adjusted revenue receipts while tightening overdraft restrictions.
Shifting the base to revenue receipts
The Advisory Committee on Ways and Means Advances (WMA) to State Governments, chaired by I S N Prasad, submitted its report proposing a revised aggregate WMA limit of ₹67,839 crore across states and union territories, up from ₹61,008 crore.
The panel recommended replacing total expenditure with a three-year average of adjusted revenue receipts (2022-23 to 2024-25) as the calculation base.
Under this formula, lottery expenditures are deducted from receipts while net positive outlays on natural calamities are added.
The report advises annual administrative revisions capped at an increase of 4.0 percent per year to mirror growth in state budgets without requiring ad-hoc reviews, ensuring that individual state limits never fall below their existing allocations.
Tighter overdrafts and higher drawing limits
To incentivize contributions to buffer reserves, the committee recommended increasing the Special Drawing Facility (SDF) limit against Consolidated Sinking Fund (CSF) holdings from 50 percent to 75 percent.
Concurrently, the panel proposed tightening overdraft rules by lowering the maximum consecutive overdraft days from 14 to 10 and quarterly days from 36 to 30. It also recommended removing the five-year lock-in period for CSF and Guarantee Redemption Fund balances once a state reaches the 5.0 percent target.
Disciplined liquidity, not deficit funding
Linking limits to revenue receipts penalizes spending binges and restores WMA as a temporary cash smoother.
Stricter overdraft caps will force chronic regional borrowers to improve cash forecasting.
Expanding collateralized drawing allowances appropriately rewards states maintaining solid fiscal buffers.