---
title: "Market Stabilisation Scheme (MSS): RBI Liquidity Tool"
description: "The Market Stabilisation Scheme (MSS) helps the RBI manage surplus rupee liquidity from foreign exchange inflows by issuing government securities."
url: "https://modeldiplomat.com/learn/glossary/market-stabilisation-scheme"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- The Market Stabilisation Scheme is a monetary instrument under which the Reserve Bank of India issues government securities to absorb surplus rupee liquidity arising from foreign exchange inflows.
- Why are MSS proceeds kept separate from the Consolidated Fund of India?
- How does the MSS differ from Open Market Operations?
- Who decides the MSS ceiling and how often is it revised?
- Are MSS securities tradeable and SLR-eligible?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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## Timeline

1. 25 March 2004

   The scheme was formalised through a Memorandum of Understanding signed between the Government of India and the RBI on , and operationalised from April 2004.

2. 8 November 2016

   The most dramatic recent invocation followed the demonetisation of high-value currency notes announced on .

3. 28 November 2016

   On the government, on the RBI's recommendation, raised the MSS ceiling to ₹6,00,000 crore to enable the central bank to issue cash management bills and abso…

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Example

In November 2016, following demonetisation, the Government of India raised the MSS ceiling to ₹6,00,000 crore on the RBI's recommendation to absorb the liquidity surge from deposited currency notes.

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