In the context of the Indian Economy, what are Ways and Means advances?a)These are part of infrastructure projects financing mechanism by National Investment and Infrastructure Fund.b)These are part of monetary exchanges between two countries as a part of Double Taxation Avoidance Agreements (DTAA).c)These are temporary loans advanced by RBI to central and state governments.d)These are loans advanced by IMF to overcome financial crisis.Correct answer is option 'C'. Can you explain this answer?

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In the context of the Indian Economy, what are Ways and Means advances?

a)
These are part of infrastructure projects financing mechanism by National Investment and Infrastructure Fund.
b)
These are part of monetary exchanges between two countries as a part of Double Taxation Avoidance Agreements (DTAA).
c)
These are temporary loans advanced by RBI to central and state governments.
d)
These are loans advanced by IMF to overcome financial crisis.

Correct answer is option 'C'. Can you explain this answer?

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In the context of the Indian Economy, what are Ways and Means advances...

The Reserve Bank of India gives temporary loan facilities to the center and state governments as a banker to the government. This temporary loan facility is called Ways and Means Advances (WMA). Hence option c is the correct answer.
This facility is provided to help them tide over temporary mismatches in the cash flow of their receipts and payments. This is guided under Section 17(5) of the RBI Act, 1934.
The WMA scheme for the Central Government was introduced on April 1, 1997. The WMA scheme was designed to meet temporary mismatches in the receipts and payments of the government. This facility can be availed by the government if it needs immediate cash from the RBI. The WMA is a loan facility form the RBI for 90 days which implies that the government has to vacate the facility after 90 days. The limits for WMA are mutually decided by the RBI and the Government of India.
The RBI provides an overdraft facility when the WMA limit is breached. The overdraft is not allowed beyond 10 consecutive working days. The interest rate on overdrafts would be 2 percent more than the repo rate.
There are two types of WMA – normal and special. While Normal WMA is clean advances, Special WMA is secured advances provided against the pledge of the government of India–dated securities.
For the states, there are two types of WMA – normal and special. Special WMA has secured advances provided against the pledge of the government of India–dated securities. After the exhaustion of the special WMA limit, the State Government are provided with a normal WMA.

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In the context of the Indian Economy, what are Ways and Means advances?a)These are part of infrastructure projects financing mechanism by National Investment and Infrastructure Fund.b)These are part of monetary exchanges between two countries as a part of Double Taxation Avoidance Agreements (DTAA).c)These are temporary loans advanced by RBI to central and state governments.d)These are loans advanced by IMF to overcome financial crisis.Correct answer is option 'C'. Can you explain this answer?

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