Q. “Surplus liquidity of a more enduring nature arising from large capital inflows is absorbed through sale of short-dated government securities and treasury bills” – described as?

[A] Liquidity Adjustment Facility

[B] Standing Deposit Facility

[C] Market Stabilization Scheme

[D] Open Market Operations

Answer: C
Notes:

Explanation: Market Stabilisation Scheme (MSS) is an 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.

Source: Ramesh Singh

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