Correct option is D
The Market Stabilization Scheme (MSS) is used by the Reserve Bank of India (RBI) to absorb surplus liquidity from the market, primarily arising from large capital inflows. The surplus liquidity is absorbed through the sale of government securities. However, the MSS account liquidity cannot be used for normal government expenditure; it is specifically used for market stabilization purposes.
Information Booster:
· The MSS was introduced in 2004 to manage the liquidity effects of large capital inflows and to maintain price stability.
· The funds mobilized through MSS are held in a separate account with the RBI, but cannot be used for regular government spending.
Additional Knowledge:
· (a) and (b): Both statements are true as MSS is designed to absorb excess liquidity through the sale of government securities.
· (c): This statement is also true; the RBI maintains an MSS account specifically for liquidity management.
English
10 Questions
20 Marks
12 Mins
