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Coronavirus impact: RBI sharply hikes central govt’s short-term borrowing limit to Rs 2 lakh crore

The central bank last week announced a 60 per cent increase in the WMA limit of state governments over and above the level as on March 31.

The Reserve Bank of India (RBI) on Monday announced a sharp 66 per cent increase in the Ways & Means Advances (WMA) limits of the central government. The limit has been hiked from Rs 1.2 lakh crore (announced on March 31) to Rs 2 lakh crore. “To tide over the situation arising from the outbreak of the COVID-19 pandemic, it has been decided, in consultation with the Government of India, that the limit for Ways and Means Advances (WMA) for the remaining part of first half of the financial year 2020-21 (April 2020 to September 2020) will be revised to Rs 2,00,000 crore,” RBI said in a statement.

The central bank last week announced a 60 per cent increase in the WMA limit of state governments over and above the level as on March 31, to enable them to undertake coronavirus containment and mitigation efforts and better plan their market borrowings.  WMA is a short-term borrowing arrangement between the RBI and central and state governments. The massive increase in WMA comes at a time when the government is expected to announce further relief measures to fight against coronavirus pandemic.

The RBI recently announced a slew of fresh measures to infuse liquidity in the system amid coronavirus lockdown. The central bank last week made an announcement to conduct a second tranche of targeted long-term repo operation (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore, to begin with. It also lowered reverse repo rate to 3.75 per cent to boost liquidity. It was the second cut in the last three weeks.

Source: Business Today