What is the common examiner trap about Economy in UPSC exams?

They will ask about the sequence or duration of using these instruments (SDF -> WMA -> Overdraft) and swap the number of days (e.g., 175 days for WMA with 123 days for Overdraft). They might also confuse the purpose: SDF is interest-free, WMA is interest-bearing, and Overdraft is the costliest last resort.

What should UPSC aspirants remember about Economy for Prelims?

1. Target this Data: Telangana maintained minimum cash balance without RBI support for only 2 days in FY 2024-25. 2. Target this Nodal Body: Reserve Bank of India (RBI) as the provider of financial accommodation instruments (SDF, WMA, Overdraft). 3. Target this Legal Point: CAG (Comptroller and Auditor General) audits and tables the Finance Accounts in the state legislative assembly.

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Telangana Relied on RBI Financial Accommodation (SDF, WMA, Overdraft) for 363 Days in FY 2024-25 with ₹64,000 Cr Market Borrowings

Q: Which constitutional body audits the Finance Accounts of state governments, as mentioned in the news regarding Telangana's finances?

Comptroller and Auditor General of India (CAG), The article states that the Finance Accounts for 2024-25 were 'audited by the Comptroller and Auditor General of India'. The CAG is the supreme audit institution of India, established under Article 148 of the Constitution, responsible for auditing government receipts and expenditure.

Q: Consider the following statements regarding Telangana's finances in FY 2024-25 as per the news article: 1. The state government maintained the minimum cash balance with RBI without using financial accommodation instruments for 65 days. 2. The state exceeded its sanctioned limits for both Special Drawing Facility (SDF) and Ways and Means Advances (WMA) during the fiscal year. 3. The state's market borrowings during the year amounted to ₹64,000 crore. Which of the statements given above is/are correct?

Both 2 and 3, Statement 1 is incorrect. The state maintained the minimum balance without support for only 2 days, not 65 days (65 days was the duration for which it used SDF). Statement 2 is correct as the article states 'the State exceeded both [SDF and WMA limits] during the fiscal'. Statement 3 is correct as the article mentions 'market borrowings to the tune of ₹64,000 crore'.

Q: According to the Finance Accounts for 2024-25, for how many days did the Telangana government rely on the 'Ways and Means Advances' facility from the RBI to maintain its minimum cash balance?

175 days, The article explicitly states: 'The Ways and Means Advances helped the government sustain the balance for almost half the year, 175 days'. 65 days refers to SDF usage, and 123 days refers to Overdraft usage.

Q: What is the primary implication of a state government persistently relying on RBI's Overdraft facility, as seen in Telangana's case?

It signals severe fiscal stress and the most expensive form of short-term borrowing., Overdraft is availed after exhausting the SDF and WMA limits. It is the costliest form of RBI accommodation and indicates that the government's cash balance has fallen below zero, representing acute fiscal stress and poor treasury management. It is not used for project financing or as a substitute for market borrowings.

Economy PolityHIGH

Target:UPSC GS-IIIMPSCBankingSSC GATeachingPrelims HighMains MediumStatic GK Link

30 Mar 2026

~2 min

Source: The Hindu

Key Data:₹64,000 crore market borrowings₹4,966.69 crore SDF limit₹2,407 crore WMA limit₹1.38 crore minimum cash balance2 days without support65 days SDF

Bodies:RBICAG

Practice MCQs from today's news ▸

~2 min · Quick mode

What This Article Covers

1.Telangana could maintain the mandatory minimum cash balance with RBI without financial accommodation for only 2 days in FY 2024-25, highlighting acute fiscal stress.

2.The state utilized Special Drawing Facility (SDF) for 65 days, Ways and Means Advances (WMA) for 175 days, and Overdraft for 123 days, exceeding its sanctioned limits.

3.This scenario is a perfect case study for exams on fiscal federalism, state finances, RBI's role as banker to governments, and the consequences of high budget deficits.

The Big Picture

Prelims · HighMains · Medium

Telangana's severe cash crunch forced it to use RBI's financial accommodation tools (Special Drawing Facility, Ways and Means Advances, Overdraft) for 363 days in FY 2024-25, despite raising ₹64,000 crore via market borrowings. This case study is vital for understanding fiscal stress, state-RBI financial arrangements, and the implications of persistent deficit financing.

Exam Lens

Quick Exam Facts From News

Days Without RBI Support2 days

Days on SDF65 days

Days on WMA175 days

Days on Overdraft123 days

Market Borrowings (FY 2024-25)₹64,000 crore

SDF Limit (31 Mar 2025)₹4,966.69 crore

WMA Limit (31 Mar 2025)₹2,407 crore

Minimum Cash Balance₹1.38 crore

1-Minute Revision

›Days Without RBI Support: 2 days
›Days on SDF: 65 days
›Target this Data: Telangana maintained minimum cash balance without RBI support for only 2 days in FY 2024-25.
›Target this Nodal Body: Reserve Bank of India (RBI) as the provider of financial accommodation instruments (SDF, WMA, Overdraft).
›Target this Legal Point: CAG (Comptroller and Auditor General) audits and tables the Finance Accounts in the state legislative assembly.

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Practice exam-style questions, track your score, and strengthen your recall.

News Snapshot

💰

Chronic Cash Crunch

Telangana maintained the mandatory minimum cash balance with RBI without external support for only 2 days in the entire financial year 2024-25.

🏦

RBI Accommodation Tools

The state relied on RBI's Special Drawing Facility (SDF), Ways and Means Advances (WMA), and Overdraft facilities for 363 days to meet its daily cash requirements.

📊

Fiscal Stress Indicators

Despite a budget of over ₹3 lakh crore and market borrowings of ₹64,000 crore, the state exceeded its SDF and WMA limits, indicating poor cash flow management.

Detailed Analysis & Strategic Depth

Context / Background

State governments are required to maintain a minimum cash balance with the RBI under an agreement. If the balance falls below this threshold, they must avail RBI's financial accommodation instruments. These are short-term liquidity facilities meant for temporary mismatches, not for financing persistent deficits. Telangana's situation reveals a structural gap between its revenue and expenditure, forcing it into near-permanent reliance on these tools.

Core Analysis & Implications

The data shows a cascading failure in fiscal management. The state first exhausted its SDF limit for 65 days, then moved to WMA for 175 days, and finally resorted to overdraft for 123 days. Overdraft is the costliest and indicates the most severe stress. Exceeding sanctioned limits points to a breakdown in fiscal discipline. The implications are severe: high interest costs crowd out developmental spending, credit rating downgrades become likely, and it sets a dangerous precedent for other fiscally stressed states. It also questions the efficacy of a ₹3 lakh crore budget if cash management fails so drastically.

Future Outlook / Way Forward

The CAG-audited Finance Accounts tabled in the assembly will trigger scrutiny. The RBI may impose stricter conditions or reduce limits for future accommodations. Telangana must urgently implement measures to boost own tax revenue, rationalize expenditure, and improve treasury management. This case may also revive debates on the need for a Fiscal Responsibility and Budget Management (FRBM) framework at the state level with stricter enforcement mechanisms to prevent such chronic cash crunches.

Key Facts at a Glance

Days Without RBI Support2 days

Days on SDF65 days

Days on WMA175 days

Days on Overdraft123 days

Market Borrowings (FY 2024-25)₹64,000 crore

SDF Limit (31 Mar 2025)₹4,966.69 crore

WMA Limit (31 Mar 2025)₹2,407 crore

Minimum Cash Balance₹1.38 crore

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Practice exam-style questions based on this article.

Q1Static LinkageEasyUPSC, SSC, State PSC

Which constitutional body audits the Finance Accounts of state governments, as mentioned in the news regarding Telangana's finances?

Q2Statement-basedHardUPSC, SSC, Banking

Consider the following statements regarding Telangana's finances in FY 2024-25 as per the news article:

1. The state government maintained the minimum cash balance with RBI without using financial accommodation instruments for 65 days.

2. The state exceeded its sanctioned limits for both Special Drawing Facility (SDF) and Ways and Means Advances (WMA) during the fiscal year.

3. The state's market borrowings during the year amounted to ₹64,000 crore.

Which of the statements given above is/are correct?

Q3Data-centricMediumUPSC, SSC, Banking

According to the Finance Accounts for 2024-25, for how many days did the Telangana government rely on the 'Ways and Means Advances' facility from the RBI to maintain its minimum cash balance?

Q4Application/ImpactMediumUPSC, Banking

What is the primary implication of a state government persistently relying on RBI's Overdraft facility, as seen in Telangana's case?

All 20 MCQs ▸

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Telangana Relied on RBI Financial Accommodation (SDF, WMA, Overdraft) for 363 Days in FY 2024-25 with ₹64,000 Cr Market Borrowings

Exam Lens

Quick Exam Facts From News

1-Minute Revision

News Snapshot

Chronic Cash Crunch

RBI Accommodation Tools

Fiscal Stress Indicators

Detailed Analysis & Strategic Depth

Context / Background

Core Analysis & Implications

Future Outlook / Way Forward

Prelims Flashpoints

Key Facts at a Glance