The Reserve Bank of India (RBI) today said that the government has transferred Rs 5,000 crore into its account from a exclusive account meant for maintaining liquidity to meet its cash requirements.
"On a review of its cash position, the Government of India, in consultation with the RBI, decided to transfer an amount of Rs 5,000 crore from the (Market Stabilisation Scheme) MSS cash account to the normal cash account of the government on March 11," the RBI said in a statement.
"An equivalent amount of government securities would accordingly form part of the normal borrowing of the Government of India for the fiscal year 2009-10," it added.
It may be recalled that following the amendment to the MoU on the Market Stabilisation Scheme (MSS) on February 26 2009, it was decided to transfer in installments an amount of Rs 45,000 crore from the MSS cash account to the normal cash account of the government by March 31, 2009.
Cash raised through the sale of MSS bonds, which are issued to absorb excess liquidity to contain inflation, are sequestered or parked in a separate account (called MSS cash account) held with the RBI.
However, when these funds are converted into normal government borrowing it is technically called de-sequestering of MSS bonds. This kind of conversions generally do not jack up interest rates as there are no additional market borrowings.