Move to check rupee rise
New Delhi/Mumbai, April 27:
Policy-makers are weighing options to limit the fallout of huge dollar inflows on the economy. Opinions within the government and the RBI are veering towards market stabilisation schemes and curbs on external commercial borrowings (ECBs) to negate the impact of the dollar deluge.
To begin with, the Reserve Bank of India today raised the ceiling of the market stabilisation scheme (MSS) to Rs 1.10 lakh crore for 2007-08 from Rs 80,000 crore at present. The government, in consultation with the RBI, increased the ceiling for the outstandings by Rs 30,000 crore for the year 2007-08, the central bank said.
Market stabilisation schemes are RBI interventions to suck out excess money from the system through bonds. Under the scheme, the RBI conducts periodic auctions of dated government securities and treasury bills.
The interest on the money raised under the MSS, which is kept in a separate account with the RBI, is paid by the government. The current MSS outstandings are at Rs 78,000 crore, and the threshold for revising the ceiling has been fixed at Rs 95,000 crore, it said.
The finance ministry and the RBI have both felt the need to neutralise the impact of the inflows, following the recent appreciation of the rupee.
Earlier this week, a day before its credit policy, the RBI said it would keep in abeyance its measures for liberalising the ECBs.
The new measures were announced in October last year, under which the ECB limit was raised to $22 billion. For an individual firm, the limit was set at $500 million.
“In view of the prevailing market conditions and likely impact on liquidity, it has been decided to keep the operationalisation of the policy announcement in abeyance,” the RBI had said.[From Internet]
Best wishes,
Suman Mukherjee
India.
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