Financial Daily from THE HINDU group of publications
Tuesday, Feb 24, 2004
Financial Daily from THE HINDU group of publications Tuesday, Feb 24, 2004 |
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Money & Banking
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Credit Market Market stabilisation bonds for up to Rs 60,000 cr proposed Our Bureau
Mumbai , Feb. 23 THE RBI has proposed to the Government of India to authorise issuance of existing debt instruments such as treasury bills and dated securities under the Market Stabilization Scheme. For the present, the total outstanding obligations of the Government by way of bills and securities issued under the MSS will not exceed Rs 60,000 crore, said an RBI press release. The apex bank said that the Government of India and RBI can enter into a memorandum of understanding under the scheme, to issue securities up to a mutually agreed upon specified ceiling. The bills and securities will be issued by way of auctions to be conducted by RBI. The central bank will decide and notify the amount, tenure and timing of issuance of such treasury bills and dated securities. Whenever RBI issues such securities for the purpose of market stabilisation and sterilisation, a press release at the time of issue would indicate such purpose, the release said. The bills and securities issued for the purpose of MSS would be matched by an equivalent cash balance held by the Government with RBI and thus, there will only be a marginal impact on revenue and fiscal deficits of the Government to the extent of interest payment on the bills and securities outstanding under the MSS. The cost would be shown separately in the budget and this would add transparency to the cost of sterilisation, the release said. According to RBI, the intention of introducing MSS is essentially to differentiate the liquidity absorption of a more enduring nature by way of sterilisation from the day-to-day normal liquidity management operations. The total absorption of liquidity from the system by RBI will continue to be in line with the monetary policy stance from time-to-time and accordingly the liquidity absorption will get apportioned among the instruments of LAF, MSS and normal open market operations.
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