Ways and Means Advances (WMA) is a mechanism used by the Reserve Bank of India (RBI) to provide temporary financial assistance to the Central and State governments to help them manage temporary mismatches in their cash flow. 

Key aspects of WMA include:

• Type: WMA can be either normal (clean advances) or special (secured advances provided against the pledge of the government of India–dated securities).

• Duration: Central Government has a 10-consecutive-working-day limit, while State Governments have a 21-day limit.

• Interest rate: The interest rate on WMA is at or around the bank rate (with small adjustments for different kinds of WMA for State Governments) and overdrawing if any carries a 2% higher interest.

• Amount ceiling: Limits on WMA are fixed at the beginning of a fiscal year by the RBI.

• Minimum balances: The minimum balance required to be maintained by the government on Fridays and at the close of the government's or RBI's financial year should not be less than Rs.100 crore and on any other working day not less than Rs.10 crore.

• Transparency: There have been calls for increased transparency in the setting of WMA limits, as the process has been criticized for being arbitrary and non-transparent.

The purpose of Ways and Means Advances (WMA) is to provide temporary financial assistance to the Central and State governments to help them manage temporary mismatches in their cash flow. WMA is used to:

• Help governments tide over temporary mismatches in the cash flow of their receipts and payments.

• Provide support for purely temporary difficulties that arise on account of mismatch/shortfall in revenue or other receipts for meeting government liabilities.

• Bridge the interval between expenditure and receipts.

• Serve as a mechanism to provide short-term funding to governments when they face cash flow problems.

• Help governments rein in borrowing costs, which in turn helps their finances in the long run.

WMA is not a long-term solution to financial problems but rather a tool to help governments manage temporary cash flow issues. The interest rate on WMA is at or around the bank rate, and overdrawing if any carries a 2% higher interest.

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