What Is the Full Form of MSS in Banking?

Full Form of MSS in Banking

The Full Form of ‘MSS’ in Banking is ‘Market Stabilisation Scheme’.

Full Form of MSS

The full form of MSS in banking is Market Stabilisation Scheme. This scheme is an initiative taken by the Reserve Bank of India (RBI) for controlling the volatility in the money market and ensuring adequate liquidity in the economy. The main objective of this scheme is to absorb excess liquidity from the system so as to maintain effective monetary and financial stability.

Under this scheme, RBI issues short-term securities such as treasury bills and dated securities for absorbing surplus funds from banks and other financial institutions. This helps to reduce the excess liquidity which could otherwise lead to inflationary pressures in the economy. The amount of funds which are absorbed by RBI under this scheme are kept as deposits with it which earns interest at a fixed rate determined by RBI itself.

The MSS was introduced after a period of high inflation during 2002-03 when demand-supply imbalance led to a sharp increase in short term money market rates. The primary purpose behind introducing this scheme was to reduce volatility in money market rates so that investors can have confidence while making their investments. This also helps RBI to control inflationary pressures and manage liquidity in a better way.

The MSS consists of two components – Cash Management Bills (CMBs) and Market Stabilization Bonds (MSBs). CMBs are issued for shorter duration ranging from 14 days up to 91 days whereas MSBs are issued for longer duration ranging from 1 year up to 5 years. Both these instruments help in absorbing excessive liquidity through open market operations conducted by RBI every week or fortnight depending upon the situation prevailing at that point of time.

Apart from having direct impact on prices, the MSS also helps in controlling credit expansion, reducing systemic risks posed by excessive liquidity, maintaining exchange rate stability, preventing rupee appreciation etc., Currently, under this scheme around Rs 3 lakh crore has been absorbed by RBI since its introduction in 2004 till date.

Thus, it can be concluded that Market Stabilisation Scheme (MSS) plays an important role in managing money supply and ensuring economic stability within the country. It provides an efficient mechanism for controlling volatile movements in exchange rates and keeping inflation under check while providing necessary liquidity when required.

Queries Covered Related to “MSS”

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  • Johnetta Belfield

    Johnetta Belfield is a professional writer and editor for AcronymExplorer.com, an online platform dedicated to providing comprehensive coverage of the world of acronyms, full forms, and the meanings behind the latest social media slang.

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