The Reserve Bank of India revised the ceiling for outstanding under the Market Stabilisation Scheme for 2007-08 to Rs 2,50, 000 crore, it said in a release. The threshold at which the ceiling would be reviewed is now fixed at Rs 2,35,000 crore.
The earlier limit under MSS was Rs 2,00,000 crore. Bankers said the new limit was not a surprise as they were expecting the RBI announcement sooner or later.
The MSS under which the RBI drains out liquidity through issuance of government bonds is an effective tool but incurs a cost to the government by way of coupon.
With the MSS auction of treasury bills held Wednesday, the outstanding amount under MSS will be Rs.1,80,155 crore, the RBI said.
The RBI in its recent mid-term review of monetary policy announced a 50 bps hikein cash reserve ratio to 7.5%. CRR is the cash banks maintain with the RBI as a percentage over its net deposits.
The new CRR, which will come into effect this Thursday will suck out Rs 16,000 crore of cash in one go.
In the meanwhile, the RBI has reset the coupon rate on the country’s floating-rate bonds maturing in November 2012 at 7.57% for the year starting November 10.
The interest rate on the bonds is reset by the RBI once a year based on 364-day treasury-bill yields.
The variable base rate for interest is calculated on the average rate of the yields at cut-off prices of the last three auctions of Government of India 364-day Treasury
Bills held up to commencement of respective annual coupon period.
When the 2012 bonds were initially sold on Nov. 7, 2003, the coupon was set at 9 basis points above the average of the yields at the preceding three 364-day bill sales.
The average rate at the past three bill sales this year was 7.48%, taking the coupon rate on the 2012 bonds to 7.57%, the Reserve Bank of India said.