India cenbank raises short-term borrowing limit for states from July 1

MUMBAI (Reuters) - The Indian central bank has increased the aggregate limit of a special short-term borrowing facility meant for state governments and union territories (UTs) beginning July 1, taking into account their expenditure data in recent years.

The revised aggregate Ways and Means Advances (WMA) limit for states and UTs will be 601.18 billion rupees ($7.21 billion), compared with the current limit of 470.10 billion rupees, the Reserve Bank of India (RBI) said in a release on Friday.

The RBI provides WMA to states banking with it to help them tide over temporary mismatches in the cash flow of their receipts and payments.

The change in the WMA was also based on recommendations made by an RBI-constituted group, comprising select state finance secretaries, the central bank said.

Meanwhile, the RBI said it has curbed the borrowing limit for states through the special drawing facility (SDF).

The facility shall continue to be linked to the quantum of their investments in marketable securities, issued by the government, the RBI said in the release.

States can now avail a maximum of 50% or lower of the outstanding balance of the funds as on the last date of the second preceding quarter.

They can also use the current balance held in either the Consolidated Sinking Fund or Guarantee Redemption Fund, reserve funds set by the central bank with the states' contributions to service debt payments.

($1 = 83.3330 Indian rupees)

(Reporting by Siddhi Nayak; Editing by Sohini Goswami)