The MSS operates symmetrically, and acts as a store of liquidity and hence has the flexibility to smoothen liquidity in the banking system both during episodes of capital inflows and outflows. When capital outflows were experienced in 2008, and the borrowing requirement of government increased, it was decided to buy back MSS securities while simultaneously issuing new securities under the borrowing program.
The agreement between RBI and GOI alluded to earlier was amended in February 2009 to allow the funds immobilised under the MSS to be de-sequestered instead of going in for fresh borrowing. So far between March and May this year, cash balances of nearly $ billion have been de-sequestered.