KOCHI: For a state that has found it increasingly difficult to manage its treasury, the RBI’s proposal to increase the Ways and Means Advances (WMA) for states is likely to offer only limited help.
The RBI’s Advisory Committee on Ways and Means Advances (WMA) has recommended raising Kerala’s borrowing limit from Rs 2,308 crore to Rs 2,503 crore, an increase of 8.5%. This is below the proposed 11.2% increase in the aggregate limit for states, from Rs 61,008 crore to Rs 67,839 crore.
The committee, chaired by I S N Prasad, was constituted on April 30, 2026, to review the WMA framework. Kerala Additional Chief Secretary (Finance) K R Jyothilal was a member.
WMA is a short-term facility provided by the RBI to help states manage temporary mismatches between receipts and expenditure. It is not intended to finance persistent revenue deficits or routine expenditure. States first access the Special Drawing Facility (SDF), followed by WMA, with an overdraft (OD) triggered once the WMA limit is exhausted.
Multiple reports highlight a sharp deterioration in Kerala’s reliance on these facilities. The state had no WMA usage between 2011 and 2013 but has drawn on the facility every year since 2015. In 2024, it availed WMA for 125 days and remained in overdraft for 67 days. In 2025, WMA usage increased to 262 days, while overdraft lasted 84 days.
Between 2022 and 2026, Kerala remained on WMA for 696 days and in overdraft for 178 days, according to the data cited in the state’s fiscal health report.
The relatively small increase in the limit reflects the proposed shift to a revenue-receipts-based formula. Kerala’s revenue receipts declined from Rs 1,32,725 crore in 2022-23 to Rs 1,24,861 crore in 2024-25. The formula also deducts lottery expenditure, which amounts to around Rs 11,000-11,700 crore annually, from the calculation base.
Lekha Chakraborty, professor at the National Institute of Public Finance and Policy, told the TNIE that the proposed revision should be viewed alongside the Sixteenth Finance Commission’s approach to categorising states according to their debt position.
“For Kerala, the central issue is not simply whether the state can access an additional Rs 195 crore of WMA. Short-term liquidity support is meant to bridge temporary mismatches in public finances, not to serve as a medium-term debt strategy or a tool for fiscal consolidation,” she said.
Chakraborty said Kerala continued to face a structural imbalance between its committed expenditure and revenue base, compounded by volatility in tax transfers.
“The proposed WMA increase provides some operational flexibility, but it does not resolve the underlying debt dynamics. WMA can manage a cash-flow problem, but it cannot resolve a debt problem. The overall debt maturity structure is significant for public debt management,” she said.
The committee has also proposed tightening overdraft norms by reducing the maximum consecutive OD period from 14 to 10 working days and the quarterly limit from 36 to 30 days.
For Kerala, the report points to another avenue for improving access to relatively cheaper liquidity. The committee has recommended raising the amount states can borrow against eligible investments in their Consolidated Sinking Fund (CSF) from 50% to 75%.
Kerala’s CSF stood at Rs 3,966 crore at the end of July 2026, equivalent to just 1.3% of its outstanding marketable debt, against the recommended target of 5%. The proposed changes could incentivise the state to build up the fund, although doing so would require setting aside additional resources.