The govt, in consulation with RBI, had earlier revised the ceiling for bonds sale under Market Stabilisation Scheme to Rs 1,10,000 cr from Rs 78,000 cr.
NEW DELHI: The government on Wednesday said it is not reviewing the Rs 1,10,000cr cap on bonds sale meant to absorb rupee liquidity generated through RBI's intervention in the forex market, but kept its option open to do so in future.
"You cannot say review is on... We will review it, if it is necessary," Finance Minister P Chidambaram said.
The government, in consulation with RBI, had earlier revised the ceiling for bonds sale under Market Stabilisation Scheme to Rs 1,10,000 crore from Rs 78,000 crore.
RBI had said the review could be done when Rs 95,000 crore bonds in total would be sold. Bonds sale will rise to more than Rs 95,000 crore after an auction on Wednesday.
Traders expect the ceiling to be raised as the rupee is ruling at nearly nine-year high against the dollar.
The Reserve Bank has purchased dollars to rein in rupee, which has been risen nearly 9 per cent against the US currency since the beginning of 2007. This intervention releases rupees into the money market, triggering inflationary pressures. To sterilise this, the RBI resumed bonds sale under MSS from March.
On Tuesday, the government put restrictions on external commercial borrowings to check the rise in rupee value. The government disallowed companies raising more than 20 million dollars of ECB to remit the funds into India. Besides, those raising up to 20 million dollars of ECB will have to seek RBI permission to remit such funds in India.
RBI had on July 31 raised mandatory cash deposits of banks with the central bank, technically called Cash Reserve Ratio, by 0.5 per cent to suck around Rs 16,000 crore of excess liquidity from the system.
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