MSS Limit Raised To Rs. 6 Lakh Crore To Manage Liquidity

MSS Limit Raised To Rs. 6 Lakh Crore To Manage Liquidity In order to manage the extra liquidity from the system after the demonetisation, government and the Reserve Bank of India has sharply raised the Market Stabilisation Scheme (MSS) ceiling to Rs. 6 lakh crore from Rs. 30,000 crore on December 2, 2016.  MSS Bonds issued by the government are aimed at providing the central bank with a stock of

securities to intervene in the market for managing liquidity. Money raised via these bonds are not used for government spending and are sequestered and maintained in a separate account.

iii. The RBI also auctioned the 28-day Cash Management Bills (CMB) of Government of India worth Rs. 20,000 crore using ‘Multiple Price Auction’ method. CMBs will have the generic character of Treasury Bills.

iv. As part of liquidity management exercise, RBI on November 26 asked lenders to temporarily maintain an incremental cash reserve ratio (CRR) of 100 per cent which may be eased after the RBI’s monetary policy review on December 7.

v. CRR is the portion of the deposits banks are required to park with the Reserve Bank. The actual current rate of CRR is 4 per cent.