RBI raises MSS limit
BS Reporter / Mumbai November 08, 2007
In a measure to combat excess liquidity, the government today revised the ceiling on the Market Stabilisation Scheme (MSS) to Rs 2,50,000 crore as against Rs 2,00,000 crore.
With the MSS auction of Treasury bills held on Wednesday, the MSS outstanding (face value) will be Rs 1,80,155 crore, as on November 8, 2007.
The threshold at which the limit will be further reviewed is now at Rs 2,35,000 crore. The limit was earlier reviewed from Rs 1,50,000 crore to Rs 2,00,000 crore on October 4. This is the fifth time the MSS ceiling has been revised by the government in the same financial year.
The MSS is a scheme of issuing bonds and treasury bills for sucking out excess liquidity from the system.
Anticipating greater requirement of cash with banks in the festive season during the weekend, RBI today accepted bids worth Rs 500 crore in the 91-day T-bill auction out of the total notified amount of Rs 3,500 crore (Rs 3,000 crore towards the MSS).
Story Comments
Total Post : 3
Posted By : anjalir on 08 November,2007
Yet another step to curb excess liquidity!!! RBI in its monetary policy review, with increasing CRR by 50 bps, also indicated that it will continue to respond swiftly with all possible measures as appropriate to the evolving global and domestic situation impinging on inflation expectations, financial stability and the growth momentum. Continue...
Posted By : anjalir on 08 November,2007
RBI's moves suggest that monetary tightening is far from over given that the capital inflows are unlikely to abate despite restrictions on participatory notes, derivatives used by foreign investors that are not registered in India to trade on the Indian stock markets and CRR hike. RBI is facing record foreign investments that have pushed the rupee to a 9 1/2 year high and increased money supply. Continue....
Posted By : anjalir on 08 November,2007
Concld....Though the hike in MSS ceiling will raise the fiscal cost (sterilization puts an extra cost on the fiscal and cannot be done indefinitely. Moreover, with FRBM act in place, government has to control its expenditure and would not want to bear the cost of sterilization), the immediate concern of RBI is to curtail excess liquidity in market, which along with soaring oil prices may raise the inflation figures, which are currently well under the RBI's tolerance limit.
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