IAS Economy Practice Question . 26

Which among the following were the main objective of launching Market Stabilization Scheme (MSS) in 2004?
1. To meet short-term mismatches in receipts and expenditure
2. To meet the government’s expenditure
3. To provide the RBI with a stock of securities with which it can intervene in the market to manage liquidity
Choose the correct option:
[A]Only 1 & 2
[B]Only 2
[C]Only 3
[D]1, 2 & 3


Answer: Only 3
Market Stabilization Scheme (MSS) was launched in April 2004 to strengthen RBI’s ability to conduct exchange rate and monetary management. These securities issued under MSS are not to meet the government’s expenditure but to provide the RBI with a stock of securities with which it can intervene in the market to manage liquidity. Bonds such as T-bills are issued to meet short-term mismatches in receipts and expenditure. Bonds of longer maturities are called dated securities.

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