The central government was considering increasing limit of the MSS (Market Stabilisation Scheme). Reserve Bank of India has already given a proposal in this regard, Department of Economic Affairs Secretary Shaktikanta Das said. “The step had become necessary in context of excessive liquidity in the system. It is important to arrest the possible volatility in currency market,” Das said. Das, who has been handling the press following Prime Minister Narendra Modi’s historic move to demonetise Rs 500 and Rs 1000 notes, on Monday said that the increase in cash reserve ratio by RBI is part by liquidity management strategy. He also said an “increase in cash reserve ratio (CRR)” by the central bank “became necessary in light of demonetisation.”
According to Reuters, the central government had budgeted the issuance of 200 billion rupees ($2.91 billion) of MSS bonds in the year ending in March. Banks have been flush with deposits after the government scrapped 500 and 1,000 rupee notes earlier this month, forcing the RBI on Saturday to temporarily increase the amount of funds banks must deposit under the cash reserve ratio. RBI Governor Urjit Patel on Sunday said the measure to raise CRR would be reviewed once the government issues more MSS bonds, Press Trust of India reported.
In an interview to PTI, Urjit Patel also had claimed that RBI is taking all necessary steps to ease the pain of the citizens without black money. Publicly speaking for the first time since the implementation of the demonetisation policy, the RBI governor also asserted that there are enough new currency notes in the central banking institution and that banks are working in a mission mode to take them to all their branches. Over the low transaction limits from ATMs and long lines outside banks for withdrawal of currency, Urjit Patel urged people to use cash substitutes like debit cards to make transaction cheaper and easier.
The RBI governor also said that the Reserve bank and the central government is getting printing presses to work at capacity to make the new notes available in the banks to meet the increasing demand among people. On the newly introduced Rs 2,000 and Rs 500 notes, Urjit Patel said that the new currency notes have been designed in a way to make them hard to counterfeit.