Market Stabilisation Scheme Instruments To Qualify As SLR

Mumbai, March 25 | Updated: Mar 26 2004, 05:30am hrs
Treasury Bills (T-Bills) and dated-securities issued under the Market Stabilisation Scheme (MSS) would be eligible for statutory liquidity ratio (SLR), repo and liquidity adjustment facility (LAF), said the Reserve Bank of India (RBI) on Thursday. The RBI has also announced the schedule for MSS papers which covers mopping up of Rs 35,500 crore for a period of April to June 2004.

The RBI said these papers will have all the attributes of existing such papers and would be issued and serviced like any other marketable dated-stock.

The Government of India and the Reserve Bank of India (RBI) on Thursday signed a memorandum of understanding (MoU) for operational modalities of MSS. The scheme would be effective from April 2004.

An advance schedule for the borrowings under the MSS for the first quarter of 2004-05 is being announced separately, the central bank said on Thursday.

The Centre would issue treasury bills and/or dated securities under the MSS in addition to the normal borrowing requirements. The T-Bills and dated-securities will be issued by way of auctions to be conducted by the RBI. Every March, the Centre, in consultation with the RBI, will fix an aggregate ceiling for T-Bills and/or dated securities under the MSS. This ceiling will hold good till further revision during the course of the year. For 2004-05, the initial ceiling shall be Rs 60,000 crore, the RBI said.

The amounts raised under the MSS would be held in a separate identifiable cash account titled the Market Stabilisation Scheme Account (MSS Account) to be maintained and operated by the RBI. The amounts credited into the MSS Account would be appropriated only for the purpose of redemption and/or buy back of the T-Bills and/or dated securities issued under the MSS. The payments for interest and discount will not be made from the MSS Account.

The T-Bills and dated securities issued for the purpose of the MSS would be matched by an equivalent cash balance held by the Centre with the RBI. Thus, there will only be a marginal impact on revenue and fiscal balances of the Centre to the extent of interest payment on the instruments.