Mid To Be M3, Reserve Money-Neutral

The proposed Millennium India Deposit (MID) scheme will not have any impact on the money supply as well as reserve money. The Centre and Reserve Bank of India are working out an arrangement to hedge the exchange risk on the MID scheme which will be money supply and reserve money-neutral. According to sources, the RBI will open a MID maintenance of value (MID-MOV) account to which the State Bank of India and the Centre will make contributions to take care of the rupee depreciation. The MOV account will cover the proceeds of the scheme brought to the country. In other words, if SBI decides to perk part of it aboard, it will not be covered by the MOV.

 

The arrangement will trigger a rise in RBI