RBI panel proposes lifting states' WMA limit 11.2% to ₹67,839 crore
Victoria Shinder2 min readThe Reserve Bank of India published the report of its Advisory Committee on Ways and Means Advances to State Governments on 29 September. The committee, chaired by I S N Prasad, a former Additional Chief Secretary of Karnataka, reviewed the short-term credit the central bank extends to states; the RBI said it will examine the recommendations. The details below are from CNBC TV18's reading of the report.
The committee proposes raising the aggregate WMA limit for states by 11.2%, to ₹67,839 crore from ₹61,008 crore. The limit has roughly doubled in a decade: ₹32,225 crore in February 2016, ₹41,893 crore in April 2020, ₹47,010 crore in April 2022, ₹60,118 crore in July 2024 and ₹61,008 crore in January 2026. The new figure is based on adjusted revenue receipts. The committee wants limits reviewed every year on the latest three years of accounts, with any annual increase capped at 4% and no state's limit falling below its current level.
It also tightens overdraft rules. A state could stay in overdraft continuously for at most 10 working days instead of 14, and for at most 30 working days in a quarter instead of 36. The special drawing facility available against states' Consolidated Sinking Fund investments would rise to 75% from 50%, to encourage contributions to that fund and the Guarantee Redemption Fund.
The report is blunt about purpose: RBI support "is essentially meant to manage cash flows mismatches temporarily and not to finance the budget deficit". It asks states to spread market borrowing through the year, warning that concentrating it in the January to March quarter floods the market with state development loans and pushes up borrowing costs for all states.
Why it matters
State bonds are one of India's largest debt markets, and their fourth-quarter supply bulge is a recurring source of yield pressure. A higher WMA limit gives states more room to smooth cash gaps without borrowing, while the shorter overdraft spells make clear the central bank will not become a standing lender.