MSS limit may be raised over Rs 30,000 crore to manage cash

NEW DELHI: The government is considering a proposal by the Reserve Bank of India (RBI) to hike the Market Stabilisation Scheme (MSS) limit, a top finance ministry official has said.

“RBI has already given a proposal to increase the MSS limit and it is under the consideration of the government. However, I cannot speculate on the possibilities in the RBI monetary policy, which is due next month,” Economic Affairs Secretary Shaktikanta Das said.

MSS, a tool to manage liquidity, has been fixed at Rs 30,000 crore for the current fiscal.

The RBI needs a higher limit to manage liquidity deluge after demonetisation. Das said the RBI’s decision to raise cash reserve ratio (CRR) had become necessary due to an increase in liquidity in the system as large sums of money in the form of scrapped Rs 500 and Rs 1,000 notes were being deposited in banks.

The RBI had asked lenders to temporarily maintain an incremental CRR of 100 per cent to absorb excess liquidity from the system on Saturday. CRR is the portion of the deposits which banks are required to park with RBI. The actual current rate of CRR is 4 per cent.