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Banking Awareness is considered to be the high scoring section in any competitive exam. It includes two main portions, current affairs GK and static GK. In this article, we will discuss some really important Banking Awareness topics that are covered in almost all competitive exams. Also, you can download the PDF of lists of different Banking Awareness topics.
In Banking Section, the questions are asked from following topics: History of Banking, banking terms, Marketing of Banking Products, Functions of Banks, Banks and their taglines, schemes, committees related to banking, headquarters of bank, some Banking news related, apps launched by banks, new schemes etc.
In a series of sharing useful study material for upcoming banking exams. Here, we are providing Banking Awareness notes for all banking Exams (IBPS, SBI & Other Banking Exams).
Banking Awareness Study Notes on Market Stabilisation Scheme (MSS)
Market Stabilization Scheme (MSS) is a monetary policy tool used by the RBI to manage money supply in the economy.
Under Market Stabilization Scheme or MSS, if there is an excess money supply in the economy, RBI intervenes by selling Government securities (like Treasury Bills, Cash Management Bills & Dated securities.). This helps to withdraw the excess liquidity from the system.
The Market Stabilization Scheme (MSS) was launched in April 2004.
Initially, the MSS was launched to withdraw the excess liquidity in the system that was generated as a result of the RBI’s purchase of foreign currencies in the foreign exchange market. From 2002 onwards, there was huge inflow of foreign capital into India. This led to appreciation of rupee. Since appreciation is not good for exports, the RBI intervened in the foreign exchange market by buying dollars. To buy dollars, the RBI has to give rupees. In this way, high selling of rupees leads to excess liquidity (rupee) and thereby creating a potential for inflation. To overcome this situation, the RBI has sold government bonds on a general basis depending upon the volume of excess liquidity in the system. Here bonds go to financial institutions and money goes back to the RBI. This withdrawal of excess liquidity is called sterilisation.
What was the current limit under MSS?
Government had increased the ceiling on the securities issued under MSS to Rs 6 lakh crores from Rs.0.3 lakh crores to manage excess liquidity after demonetisation.
What securities to be sold under MSS?
The issued securities are government bonds and they are called as Market Stabilisation Bonds (MSBs). Thus, the bonds issued under MSS are called MSBs. These securities are owned by the government though they are issued by the RBI. It is to be remembered that government is the owner of the securities. Usually, government’s securities (bonds/treasury bills) are sold or issued by the RBI as the central bank is the banker to the government.
Who purchases the MSBs?
The securities or bonds/t-bills issued under MSS are purchased by financial institutions. They will get an interest for purchasing the securities.
