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RBI panel to mull changes to states' WMA

The Reserve Bank of India said in a statement on Tuesday that it had appointed a committee to suggest changes to a short-term overdraft facility that the central bank offers to state governments.

The central bank lends funds to state governments, up to a limit, through the ways and means facility to help them meet short-term mismatches in cash flows.

The limit for each state for the year to March 2003 is based on its average annual revenue and capital expenditure over three years up to the year ended March 2001.

States can overshoot their respective limits for up to 12 working days, after which the central bank and its agencies will stop making further payments on their behalf.

If a state's overdraft exceeds 100 per cent of its limit more than once in a financial year, it has only five working days to bring the amount within the limit, after which the central bank stops payments.

The limit on the combined short-term borrowings of all state governments for the year to March 2003 under the normal component of the facility is Rs 6035 crore (Rs 60.35 billion).

There is also a special component, which is linked to states' investments in central government securities.

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