BANKING AFFAIRS

BANKING GENERAL KNOWLEDGE

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
What is the purpose of Ways and Means Advances scheme?
A
to give insurance to the large corporates for their investment in abroad projects
B
to handle the mismatch between cash flow of the receipts and payments of the State Governments
C
to promote export oriented projects by giving interest free credit
D
None of the above
Explanation: 

Detailed explanation-1: -Ways and Means advances are meant to pass over temporary mismatches in the cash flow of receipts and payments and are not a source of permanent financial relief. It provides leverage for both the centre and the states to borrow from the RBI and it, therefore, helps to meet the receipts and payments of the government.

Detailed explanation-2: -2.2 Under Section 17(5) of RBI Act, 1934, the RBI provides Ways and Means Advances (WMA) to the States banking with it to help them to tide over temporary mismatches in the cash flow of their receipts and payments.

Detailed explanation-3: -The government can avail of immediate cash from the RBI, if required. But it has to return the amount within 90 days. Interest is charged at the existing repo rate. If the WMA exceeds 90 days, it would be treated as an overdraft (interest rate on overdrafts is 2 percentage points more than the repo rate).

Detailed explanation-4: -The term “ways and means” originated with the Parliament of England and refers to the provision of revenue to meet national expenditure requirements and to implement the objectives of economic policy. The ways and means are provided by the imposition of taxation.

Detailed explanation-5: -Press Releases. It has been decided, in consultation with the Government of India, that the limit for Ways and Means Advances (WMA) for the first half of the financial year 2022-23 (April 2022 to September 2022) will be ₹1, 50, 000 crore.

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