Banking and Financial Terms: MARKET STABILISATION SCHEME (MSS) : The Reserve Bank has been usually utilising its investment in government securities for conducting open market operations, repo and reverse repo transactions. With the increased inflow of foreign exchange and the consequent monetary expansion it becomes necessary for RBI to sterilise the monetary impact by mopping up excess liquidity through open market operations. This invariably resulted in depletion of the RBI holding of government securities hampering the control of sterilisation operation. Hence a new scheme called the Market Stabilisation Scheme was introduced in 2004. Under this scheme, Government would issue Treasury Bills and Dated Securities to the RBI for absorbing liquidity in the system. Governments cash balances with the RBI would go up correspondingly. The government cannot withdraw the amount, which is held in a separate identifiable cash account with RBI. Securities obtained under the MSS are auctioned by the RBI and the proceeds kept in separate MSS account maintained and operated by RBI. The proceeds kept in the MSS account will be utilised only for redemption of treasury bills and securities.
Posted on: Thu, 15 May 2014 12:30:01 +0000
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