The Government of India has authorised the Reserve Bank of India to issue debt instruments up to a ceiling of ₹50,000 crore under the market stabilisation scheme (MSS) for the fiscal 2014-15.

Last year too the ceiling was pegged at the same level.

MSS seeks to strengthen RBI’s ability to conduct exchange rate and monetary management operations in a manner that would maintain stability in the foreign exchange market and enable it to conduct monetary policy in accordance with its stated objectives.

In accordance with the provisions of the Memorandum of Understanding (MoU) between the Government and the RBI, the ceiling for the outstanding balance under the MSS will be reviewed when the outstanding balance reaches the threshold limit of ₹35,000 crore. The RBI, in a statement said, the current MSS outstanding balance is nil.

Treasury Bills and dated securities up to a specified ceiling, mutually agreed upon between the Government and the Reserve Bank by way of anMoU, are issued under the MSS.

The bills/bonds issued under MSS have all the attributes of the existing Treasury Bills and dated securities.

RBI auction The bills and securities will be issued by way of auctions to be conducted by the central bank. The RBI will decide and notify the amount, tenure and timing of issuance of such treasury bills and dated securities.

The bills and securities issued for MSS are matched by an equivalent cash balance held by the Government with the Reserve Bank.

Thus, there will only be a marginal impact on revenue and fiscal deficits of the Government to the extent of interest payment on bills/securities outstanding under the MSS.

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