Question

    A mechanism used by RBI by which it lends to the States to tide over temporary mismatches in the cash flow of their receipts and payments, is known as -

    A Ways and Means Advance (WMA) Correct Answer Incorrect Answer
    B Liquidity Adjustment Facility (LAF) Correct Answer Incorrect Answer
    C Market Stabilisation Scheme (MSS) Correct Answer Incorrect Answer
    D State Advance Scheme (SAS) Correct Answer Incorrect Answer
    E Government Liquidity Advance (GLA) Correct Answer Incorrect Answer

    Solution

    When there is a temporary mismatch in the cash flow of the receipts and payments of the State Governments. To handle this mismatch, there is a WMA scheme / facility which refer to Ways and Means Advances. RBI makes WMA to the state governments for a period of 90 Days. If the state government take WMA against the collateral Government securities, it is called Special WMA.

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