State governments and Union Territories (UT) who have been facing cash-flow mismatch due to the coronavirus caused COVID-19 received another relaxation from the Reserve Bank of India (RBI) after it extended the time period for them to avail overdraft facilities.
On Tuesday, the RBI said it has decided to increase the number of days for which a State or UT can be in “overdraft” continuously to 21 working days from the current stipulation of 14 working days. “The number of days for which a State or UT can be in overdraft in a quarter has been increased to 50 working days from the current stipulation of 36 working days,” it said.
“All other stipulations remain unchanged. This arrangement will come into force with immediate effect and will remain valid until September 30, 2020.”
The RBI recently enhanced the Ways and Means Advances (WMA), a temporary facility to meet revenue mismatches. It had increased the WMA limit by 30 per cent from the existing limit for Allstate’s and UTs. This is aimed to provide a cushion to the government to continue its essential activities and normal financial operations.
The latest move comes in the backdrop of its various measures in recent times for handing the coronavirus caused lockdown situation.
At present, the lockdown has impacted the government’s revenue collections which are expected to remain far lower than the budgeted targets for a few months.
The lockdown has halted economic activities with the closure of dine-in restaurants, grounding of aircraft, shutting down of factories and deserted market places.