Govt transfers Rs 28,000 cr from MSS account

The Reserve Bank of India Tuesday said the government had transferred Rs 28,000 crore (Rs 280 billion) from the account maintained for the market stabilisation scheme to the normal cash account to fund expenditure.

The decision to transfer the funds was taken after reviewing the cash position, the RBI said.

It may be recalled that the outstanding borrowing of the government from the RBI was Rs 40,412 crore (Rs 404.12 billion). This was more than the limit of Rs 20,000 crore (Rs 200 billion) set under the agreement for ways and means advances.

After the transfer, the government is now back within the WMA limit of Rs 20,000 crore (Rs 200 billion).

According to the agreement with the RBI, if the WMA borrowing stays above Rs 20,000 crore (Rs 200 billion) in April-September for 10 successive business days, the government will have to draw it down by issuing securities to the market.

While borrowing under WMA is at the repo rate, currently 4.75 per cent, any overdraft is at 2 per cent above repo, or 6.75 per cent.

In a parallel operation, an equivalent amount of government securities in the MSS portfolio will now form part of the normal borrowing of the government of India for fiscal year 2009-10.

The RBI said based on the emerging fund requirements of the government, Rs 33,000 crore (Rs 330 billion) of MSS balances would be de-sequestered against the approved market borrowing programme or bought back in the fiscal year 2009-10.

The MSS outstanding as on May 2, 2009, is Rs 42,773 crore (Rs 427.73 billion, face value).