Discussion
RBI, on behalf of government, issues MSS bonds to mop up extra liquidity from the market. This is same as Open Market Operations(OMO), but has a significant difference. What is it?
Answer: B
Market Stabilisation Scheme(MSS): This instrument for monetary management was introduced in 2004. Surplus liquidity of a more enduring nature arising from large capital inflows is absorbed through sale of short-dated government securities and treasury bills. The mobilised cash is held in a separate government account with the Reserve Bank. The instrument thus has features of both, SLR and CRR
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