RBI fixes Rs 50,000 cr ceiling for market stabilisation scheme

In order to absorb excess liquidity, the Reserve Bank has pegged the quantum of intervention through Market Stabilisation Scheme (MSS) at Rs 50,000 crore.

Under the MSS, RBI, on behalf of government, absorbs liquidity by issuing Treasury Bills and/or dated securities.

"The ceiling for outstanding balance under the MSS for the fiscal year 2012-13 has been fixed at Rs 50,000 crore," the RBI said in a statement.

The MSS ceiling is the same as was fixed for last fiscal.

"This ceiling will be reviewed when the outstanding balance reaches the threshold limit of Rs 35,000 crore," RBI said.

The government launched MSS in consultation with RBI in 2004 with the objective to absorb excess liquidity, arising out of significant foreign exchange inflows, by issuing treasury bills or dated securities.

The Government issues treasury bills and/ or dated securities under the MSS. This is in addition to its normal borrowing requirements.

For the current fiscal, the government has pegged its borrowing requirements at Rs 5.13 lakh crore. Of this, about 65 per cent or Rs 3.79 lakh would be borrowed in the April- September period.

During 2011-12, the government borrowed over Rs 5.1 lakh crore from the market. The borrowing had exceeded the budgeted borrowing target by over Rs 92,000 crore as high subsidy expenditure led to overshooting of government finances.