Since its introduction in April 2004, the MSS has served as a very useful instrument for medium term monetary and liquidity management. It has been unwound in times of low capital flows and greater liquidity needs and built up when excess capital flows could lead to excess domestic liquidity.
Going forward, there will be a continuous need to adapt the strategy of liquidity management as well as exchange rate management for effective monetary management and short-term interest rate smoothening. This issue becomes even more relevant under a freer regime of capital flows.