Consider the following statements regarding Ways and Means Advances: 1. It is a long-term loan facility for the government with RBI.2. The facility is exclusive to the Union Government.3. RBI charges interest equal to repo rate on loans given under WMA.Which of the above statements is/are correct? |ForumIAS

[A] 1 only

[B] 2 and 3 only

[C] 3 only

[D] 1 and 3 only

Answer: C

Notes:

Statement 1 is incorrect.It is a temporary short term loan facility offered by RBI to the government where the term of loan is just 90 days. The WMA scheme was designed to meet temporary mismatches in the receipts and payments of the government.
Statement 2 is incorrect.WMA is not exclusive to the Union government but is also available to state governments.
Statement 3 is correct. Interest rate for WMA is currently charged at the repo rate. If the WMA is extended for more than 90 days, it will be treated as an overdraft which is charged above repo rate.