BackGovt boosts MSS bonds limit 20 times to drain liquidity
The cap on Market Stabilization Scheme was increased to Rs6 trillion ($87.9 billion) from Rs30,000 crore for the year ending March 2017, according to a RBI statement
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Mumbai: The Narendra Modi government raised the limit on bonds it issues to the central bank to help it mop up excess liquidity in the financial system, prompting sovereign bonds to extend losses.
The cap on the so-called Market Stabilization Scheme was increased to Rs6 trillion ($87.9 billion) from Rs30,000 crore for the year ending March 2017, according to a Reserve Bank of India (RBI) statement. Banks have been flush with funds after Prime Minister Modi on 8 November banned existing Rs500 and Rs1,000 notes in a bid to curb graft. That saw people rushing to deposit the old bills with lenders.
The yield on government notes due September 2026 jumped 4 basis points to 6.25% as of 1:38 p.m. in Mumbai, according to prices from the RBI’s trading system. The benchmark equity gauge was down 0.4%. Bloomberg
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