RBI hikes WMA by 34 pc, new scheme from Feb 1

It has now been decided that the normal WMA limit may be worked out after taking into account three years average of revenue receipts and capital expenditure for fiscal years 1997-98, 1998-99 and 1999-2000 and to this base, a ratio of 2.4 per cent was applied for the non-special category states and 2.9 per cent for the special category states.

In the case of overdrafts, it will not exceed 100 per cent of normal WMA limit. On the first occasion when this is exceeded in a financial year, the RBI will advice the state that the overdraft amount should not exceed 100 per cent of normal WMA limit on any subsequent occasion.

"Without prejudice to clause (a) above, if during the financial year, the amount of overdraft exceeds 100 per cent of WMA limit, on a second or any subsequent occasion, the state shall be given five working days to bring down the overdraft amount within the level of 100 per cent of normal WMA limit. If this is not adhered to, payments will be stopped," the RBI said.

The RBI has also decided to review the entire formula for WMA in light of emerging conditions in the state finances after two years with a view to bringing the revision into effect from the third year.