##o rate up to one per cent of their respective net demand and time liabilities ( ndtl ). this limit was subsequently raised to two per cent of ndtl and in addition, scbs were allowed to borrow funds under msf on overnight basis against their excess slr holdings as well. moreover, the bank rate being the discount rate was aligned to the msf rate. fourth, the revised corridor was defined with a fixed width of 200 basis points. the repo rate was placed in the middle of the corridor, with the reverse repo rate at 100 basis points below it and the msf rate as well as the bank rate at 100 basis points above it ( chart 6 ). thus, under the new operating procedure, all the three other rates announced by the reserve bank, i. e., reverse repo rate, msf rate and the bank rate, are linked to the single policy repo rate. the new operating procedure was expected to improve the implementation and transmission of monetary policy for the following reasons. first, explicit announcement of an operating target makes market participants clear about the desired policy impact. second, a single policy rate removes the confusion arising out of policy rate alternating between the repo and the reverse repo rates, and makes signalling of monetary policy stance more accurate. third, msf provides a safety valve against unanticipated liquidity shocks. fourth, a fixed interest rate corridor set by msf rate and reverse repo rate, reduces uncertainty and communication difficulties and helps keep the overnight average call money rate close to the repo rate. let me now turn to a brief evaluation of the experience with the new operating procedure. in the implementation of the new procedure, the reserve bank prefers to keep the systemic liquidity in deficit mode as monetary transmission is found to be more effective in this situation ( rbi, 2011 ). 4 the reserve bank also announced an indicative liquidity comfort zone of ( + ) / ( – ) 1. 0 per cent of net demand and time liabilities ( ndtl ) of banks. even though the share of call money market in the overnight money market is lower than that of collateralised segment, the weighted overnight call rate is used as operating target. this is partly on account of high correlation between the overnight call money rate and the collaterallised money market rate at 0. 9. the issue was examined in detail by the working group on operating procedure of monetary policy which observed that the transmission of policy rate to

measured by unit labour costs in the industrial sector, have risen significantly less in france than in the euro area as a whole. that improvement in our overall cost - competitive situation has progressively materialised into growth, into job creations and into solid external accounts. this ongoing drive to keep prices and costs in check has been accomplished thanks to the economic and monetary strategy pursued over a long period. it is of the utmost importance that the entire euro area and europe as a whole maintain and consolidate their cost competitiveness position. since the introduction of the single currency, it is more important than ever that we closely monitor the production cost indicator, as it determines to a large extent the competitiveness of goods and services produced in our economy and, therefore, the current level of employment. it also acts as a “ leading indicator ” of future employment because it gives a measure of the attractiveness of an inward investment compared with investment outside the euro area or outside europe. embarking in bold structural reforms : in this context, we also need to pursue and step up bold structural reforms, aimed at increasing the flexibility of the economy as a whole and fostering the progress of science and technologies. this is crucial if we wish to enhance the potential growth of european economies and to continue to promote sustainable growth and enduring job creation. the european council meeting held in luxembourg in 1997 explicitly mentioned structural policies among the items selected for reinforced co - ordination. the lisbon and stockholm european councils, held in 2000 and 2001, further enhanced the medium term strategy necessary for structural reforms in the union. this strategy aims at raising the potential growth and strengthening the competitiveness of the eu economies. since its launch, this strategy has been strengthened on two points : the european council of nice adopted a social agenda which clarifies the measures to be taken in order to achieve the objective of lisbon, namely to increase the employment rate. the european council of goteborg added to this strategy an environmental dimension and confirmed the need for consistency between the various long - term policies. these strategies are aiming at making the european union the « world ’ s most dynamic economy of knowledge in 2010 ». however, the responsibility for structural reforms in the european union ultimately rests with the individual member states. consequently, a variety of institutional solutions and regulatory arrangements across countries and sectors exist. i consider that such a decentralized approach should be seen as an opportunity, even if it has also disadvantages. at least, it fosters competition whilst encouraging « cross fertilisation » of best