Under new Modi fication wave RBI revises MSS limit to Rs 6 lakh crore

After the withdrawal of the legal tender character of the Rs 500 and Rs 1000 denomination notes with effect from November 9, 2016, Indian banks have been flooded with old currency notes and have received deposits of around Rs 11 lakh crore till date and are still counting. Consequently, there has been a significant increase of liquidity in the banking system which is expected to continue in the near term.

The Reserve Bank of India (RBI) has decided to revise the ceiling for issue of securities under the Market Stabilisation Scheme (MSS) to Rs 6 lakh crore. The earlier limit was Rs 30000 crore. This hike is valid only for 28 days. Under MSS, the central bank will issue cash management bills (CMB). Auction of 28-days CMB will be done using multiple price auction method.

MSS is a tool to tap out excess liquidity from the system through issue of treasury bills and government dated stocks. MSS bonds have fixed tenures and are interest bearing.

Meanwhile, Indian markets have fallen on the last day of the week. Bank Nifty dropped almost one per cent and closed at 18250.2 on an intraday basis. Except ICICI Bank, all of the banking stocks in Bank Nifty are ended in red.