Under this scheme, the Reserve Bank has been empowered to issue government Treasury Bills and medium duration dated securities exclusively for sterilization purposes, so as to manage liquidity appropriately. The proceeds collected under MSS auctions are kept in a separate identifiable cash account with the RBI, and are used for redemption and/or buy back of securities issued under the MSS.
It must be recognised though that, given the different structures and stages of development of financial systems across countries, it will be absolutely essential to allow national discretion in applying the “framework”. BIS Review 114/2010  3  Reducing the pro-cyclicality of financial – sector regulation: Indian perspective 19.