The government is likely to soon review the borrowing limit under the Market Stabilisation Scheme (MSS), a senior finance ministry official said today. |
The government had raised the ceiling on MSS to Rs 2 trillion from Rs 1.5 trillion on October 4. The central bank had then said the MSS limit will be reviewed once it reaches the threshold of Rs 1.85 trillion. |
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The current outstanding amount under MSS is Rs 1.78 trillion, and the Reserve Bank of India is scheduled to sell T-Bills worth Rs 5000 crore later this week under MSS. |
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"Obviously, we will have to review it soon... We have no other option," the official said. Gilt prices fell on the news, with the benchmark 7.99 per cent, 2017 gilt trading at Rs 100.83 compared to Rs 100.87 earlier and Rs 100.88 at close Friday. |
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Under MSS, the government sells bonds to mop up excess liquidity. A hike in MSS limit would mean the RBI will continue to keep liquidity in the banking system on a tight leash. |
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The central bank has been using a combination of hike in Cash Reserve Ratio and MSS to impound rupee liquidity, which has been created by its regular intervention in the forex market to buy dollars. The MSS limit had been hiked to Rs 1.5 trillion from Rs 1.1 trillion in August. |
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