In yet another move aimed at liquidity management, the Reserve
Bank of India (RBI) has decided to hike the ceiling for issue of
securities under the Market Stabilisation Scheme (MSS) to Rs 6 lakh
crore, from Rs 30,000 crore.
“After the withdrawal of the legal tender character of the Rs 500, and Rs 1,000 denomination notes with effect from November 9, 2016, there has been a surge in the deposits with the banks. Consequently, there has been a significant increase of liquidity in the banking system which is expected to continue for some time,” RBI said in a circular.
“In order to facilitate liquidity management operations by the RBI in the current scenario, the Government of India has, on the recommendation of the Reserve Bank of India, decided to revise the ceiling for issue of securities under the Market Stabilisation Scheme (MSS) to Rs 6 lakh crore,” RBI added.
MSS bonds are issued with the objective of providing the central bank with a stock of securities with which it can intervene in the market for managing liquidity. These securities are not issued to meet the government’s expenditure.
As per an RBI release dated June 22, 2016, the ceiling for the outstanding balance under the MSS for the fiscal year 2016-17 was fixed at Rs 30,000 crore and the ceiling was to be reviewed when the outstanding balance reaches the threshold limit of Rs 15,000 crore.
In a seperate move, RBI also announced issuance of 28-days cash management bills under MSS for a notified amount of Rs 20,000 crore on Friday Dec 02,2016, using the multiple price auction method.
RBI, had on November 26,2016 announced that scheduled banks shall maintain an incremental cash reserve ratio of 100%, effective the fortnight beginning November 26, 2016. According to RBI, the move is intended to absorb a part of the surplus liquidity arising from the return of specified bank notes to the banking system, while leaving adequate liquidity with banks to meet the credit needs of the productive sectors of the economy
“After the withdrawal of the legal tender character of the Rs 500, and Rs 1,000 denomination notes with effect from November 9, 2016, there has been a surge in the deposits with the banks. Consequently, there has been a significant increase of liquidity in the banking system which is expected to continue for some time,” RBI said in a circular.
“In order to facilitate liquidity management operations by the RBI in the current scenario, the Government of India has, on the recommendation of the Reserve Bank of India, decided to revise the ceiling for issue of securities under the Market Stabilisation Scheme (MSS) to Rs 6 lakh crore,” RBI added.
MSS bonds are issued with the objective of providing the central bank with a stock of securities with which it can intervene in the market for managing liquidity. These securities are not issued to meet the government’s expenditure.
As per an RBI release dated June 22, 2016, the ceiling for the outstanding balance under the MSS for the fiscal year 2016-17 was fixed at Rs 30,000 crore and the ceiling was to be reviewed when the outstanding balance reaches the threshold limit of Rs 15,000 crore.
In a seperate move, RBI also announced issuance of 28-days cash management bills under MSS for a notified amount of Rs 20,000 crore on Friday Dec 02,2016, using the multiple price auction method.
RBI, had on November 26,2016 announced that scheduled banks shall maintain an incremental cash reserve ratio of 100%, effective the fortnight beginning November 26, 2016. According to RBI, the move is intended to absorb a part of the surplus liquidity arising from the return of specified bank notes to the banking system, while leaving adequate liquidity with banks to meet the credit needs of the productive sectors of the economy
No comments:
Post a Comment