The government is considering raising the ceiling under Market Stabilisation Scheme (MSS) beyond the existing Rs 30,000 crore to garner extra liquidity from the system following its decision to withdraw high-denomination currency notes on November 8.
“RBI (Reserve Bank of India) has already given a proposal for increasing the MSS limit and it is under the consideration of the government,” Economic Affairs Secretary Shaktikanta Das said. He, however, did not specify any quantum of the hike being considered.
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The MSS was launched in 2004 following a MoU between the RBI and the government with the primary aim of aiding the sterilization operations of the central bank. Under this scheme, the government borrows from the RBI and issues Treasury bills/dated securities to absorb excess liquidity from the market. The amount raised through securities issued under MSS does not get credited to the government’s account and is maintained in a separate cash account with the RBI and used only for the purpose of redemption/buyback of bonds issued under the scheme.
Das also commented on the RBI’s decision to raise cash reserve ratio (CRR), saying that it had become necessary due to increase in liquidity in the system as large deposits of scrapped Rs 500 and Rs 1,000 notes are being made in banks.
Reserve Bank Governor Urjit Patel on Sunday had said RBI announced the incremental CRR because of the large increase in deposits of banks on account of the return of Rs 1,000 and Rs 500 notes and the decision will be reviewed immediately once the government issues adequate quantum of MSS bonds.