Mumbai (ABC Live): On September 27, 2025, the Reserve Bank of India (RBI), in consultation with the Government of India, announced that the Ways and Means Advances (WMA) limit for October 2025 to March 2026 would be ?50,000 crore. This decision reflects India’s focus on balancing government liquidity management with monetary stability.

What is WMA?

Ways and Means Advances (WMA) are short-term advances provided by the RBI to the central government:

• Introduced in 1997, replacing the ad-hoc treasury bills.

• Used to bridge temporary mismatches between revenue inflows and expenditure outflows.

• Governed by a mutual agreement between RBI and the Government of India, reviewed every six months.

• Interest rate is linked to the repo rate, ensuring alignment with monetary policy.

Key Features of the Latest RBI Announcement

1. WMA Limit

   • Fixed at ?50,000 crore for H2 FY2025–26.

   • Provides a cushion during periods of higher spending.

2. Trigger for Market Borrowings

   • RBI will float fresh market loans once 75% of the limit is used.

   • This prevents overreliance on WMA.

3. Flexibility to Revise

   • RBI retains the right to revise the WMA ceiling anytime, depending on circumstances.

4. Interest Rate Mechanism

   • WMA: Repo Rate (currently 5.50%).

   • Overdraft (OD): Repo Rate + 2%.

   • The higher OD cost discourages prolonged reliance beyond WMA.

Recent Trends in WMA Limits

Cost of WMA vs Overdraft

At the current repo rate (5.50%), using the full ?50,000 crore WMA incurs the following interest costs:

Insight: Even a 30-day overdraft adds ?82 crore to the government’s cost compared to WMA. This shows how RBI uses pricing to enforce fiscal discipline.

Why WMA Matters for the Indian Economy

1. Cash Flow Management

• Smooths mismatches between tax inflows and government outflows.

• Prevents disruptions in essential payments like salaries, subsidies, and defence spending.

2. Fiscal Discipline

• A capped WMA ensures the government turns to market borrowings rather than excessive central bank financing.

• OD penalties reinforce the temporary nature of WMA.

3. Bond Market Stability

• Predictable borrowing via market loans maintains stable yields.

• Protects investor confidence in government securities.

4. Monetary–Fiscal Balance

• Linking WMA to repo ties fiscal liquidity with monetary policy.

• A higher repo = costlier WMA ? natural check on fiscal expansion.

5. Macroeconomic Credibility

• Returning from the ?2 lakh crore WMA limit in 2020 to ?50,000 crore now signals a shift from crisis management to normalised liquidity operations.

• Enhances investor confidence and India’s sovereign credibility.

Why ABC Live is Publishing This Report Now

The Reserve Bank of India’s announcement on the WMA limit for October 2025–March 2026 comes at a sensitive moment for India’s fiscal and monetary policy. With global financial volatility triggered by U.S. tariffs, geopolitical tensions in the Middle East, and domestic pre-budget pressures, understanding the mechanics of WMA is crucial for investors, policymakers, and citizens alike.

ABC Live is publishing this research report now to:

• Demystify WMA for a wider audience by explaining its purpose, historical context, and direct impact on India’s fiscal health.

• Highlight fiscal signals that markets, rating agencies, and investors will be watching closely as India enters the second half of FY2025–26.

• Provide timely analysis backed by official data, ensuring readers can assess the credibility of India’s fiscal and monetary coordination.

How This Report is Unique

Unlike routine news updates, this ABC Live research piece:

• Combines data and analysis: We include comparative tables from 2020–2025 and a detailed cost analysis of WMA vs overdraft, showing real fiscal implications.

• Focuses on investor impact: We explain how bond yields, borrowing costs, and market confidence are influenced by WMA limits.

• Places the story in context: By contrasting pandemic-era WMA highs (?2 lakh crore) with today’s normalised ?50,000 crore, the report highlights India’s fiscal transition.

• Bridges law, economics, and policy: True to ABC Live’s “law + science + communication” model, this report ties RBI’s technical policy into the broader economic and governance narrative.

Sources

• PIB Press Release, April 20, 2020 – Review of WMA limit for the Government of India

• RBI Notification, March 27, 2024 – WMA limit for H1 FY2024–25

• PIB Press Release, September 26, 2024 – H2 FY2024–25 Market Borrowing Programme

• RBI Notification, March 28, 2025 – WMA limit for H1 FY2025–26

• RBI Notification, September 26–27, 2025 – WMA limit for H2 FY2025–26

• RBI Monetary Policy Statement, June 6, 2025 – Repo rate at 5.50%

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