North Block wants MSS ceiling at Rs 72000 cr

The Reserve Bank of India (RBI) wants to raise the cap on the market stabilisation scheme (MSS) "" meant to suck out excess liquidity from the system "" to Rs 1 lakh crore from the present level of Rs 60,000 crore.

The finance ministry, however, feels that the corpus can be raised up to Rs 70,000-Rs 72,000 crore. With the slowdown in the foreign exchange reserve accretion, there may not be any need to raise the MSS to Rs 1 lakh crore, a ministry source said.

Initially, the ceiling for the MSS was capped at Rs 60,000 crore. However, the agreement entered into between the Reserve Bank of India and the Centre had the provision of reviewing it once it breaches the Rs 50,000 crore level. Till now over Rs 50,000 crore worth of government securities "" dated papers as well as treasury bills "" have been floated under the MSS.

The government has also raised about 40 per cent of its gross borrowing programme for the year "" Rs 1.5 lakh crore. Besides, another Rs 12,000 crore will be raised by the state governments under the debt swap scheme.

Sources close to the development said even though the RBI has submitted a proposal for raising it to Rs 1 lakh crore, the government may cap it around Rs 70,000-72,000 as such a huge corpus may not be required with the foreign exchange inflows drying out.