The issuance of securities under the MSS has thus enabled the Reserve Bank to improve liquidity management in the system, to maintain stability in the foreign exchange market and to conduct monetary policy in accordance with the stated objectives.
LAF  BIS Review 50/2006  MSS  Apr-06  Feb-06  Dec-05  Oct-05  Aug-05  Jun-05  Apr-05  Feb-05  Dec-04  Oct-04  Aug-04  Jun-04  140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 -20,000 -40,000 Apr-04  Rupees crore  Chart 2 : Liquidity Management  Centre's Surplus with the RBI  15  The Indian experience highlights the need for emerging market economies to allow greater flexibility in exchange rates but the authorities can also benefit from having the capacity to intervene in foreign exchange markets in view of the volatility observed in international capital flows.