practice, the monetary targeting framework was used in a flexible manner with feedback from developments in the real sector. with the changing inter - relationship between money, output and prices in the wake of financial sector reforms and opening up of the economy, a review was warranted. accordingly, the reserve bank formally switched over in 1998 - 99 to a multiple indicator approach under the guidance and framework evolved by my distinguished predecessor, dr. bimal jalan. as per this approach, interest rates or rates of return in different markets ( money, capital and government securities markets ), along with data such as on currency in circulation, credit extended by banks and financial institutions, fiscal position, trade balance, capital flows, inflation rate, exchange rate, refinancing and transactions in foreign exchange, which are available with high - frequency, are juxtaposed with the trends in output, with a view to deriving policy perspectives. keeping in view the intrinsic reporting lags and varying reliability of inflation indicators coupled with the infirmities surrounding the relevant indicators like potential output and unemployment, our efforts have focused on improving the information set, both quantitatively and qualitatively. ( c ) fine - tuning the operating procedure as regards the operating procedure of monetary policy in india, reliance on direct instruments has been reduced and a policy preference for indirect instruments has become the cornerstone of current monetary policy operations. liquidity management in the system is carried out through open market operations ( omo ) in the form of outright purchases / sales of government securities and daily reverse repo and repo operations under a liquidity adjustment facility ( laf ). the laf has enabled the reserve bank to modulate short - term liquidity under varied financial market conditions, including large capital inflows. in addition, it has enabled the reserve bank to set, as far as possible, an informal corridor for the short - term interest rates consistent with the policy stance. this has also facilitated a reduction in the levels of statutory pre - emptions without engendering liquidity pressures. these operations are supplemented by providing access to the reserve bank ’ s standing export credit refinance facility, in a limited manner, and liquidity support to the primary dealers. in this new operating environment, the reserve bank has been increasingly relying on a mix of market - based instruments and changes in reserve requirements, when necessary, for the conduct of monetary policy. changes in fixed reverse repo / repo rates set by the reserve bank from time to time

and practice and the question arises whether we are going to apply our own measure to define “ independence ”, the term we adopted as the european norm and which is applied by their institutions, or we shall go on to make up our own definition of “ independence ” and use it. it is only if we decide to use their definition of “ autonomy ” and “ independence ” of the central bank, which is the only right way to take and which reflects the meaning of the term, that we can say that we have adopted the law not for the sake of “ adopting a law ” but for the sake of getting closer to the european values and the best european practices. and “ independence ” of central banks has often and in many ways been already tested in almost all eu countries. by definition, there are five types of independence : legal, personal, functional, financial and organizational. all these facets of independence should preclude exertion of influence on the performance of nbs tasks and the achievement of its primary objective under the law on the nbs. to impinge on the effectiveness of any of these postulates means to impinge on the principles of autonomy and independence of the central bank. just as the english would put it “ you cannot be a little pregnant, either you are or you are not ”. i would also like to use this opportunity to thank the gtz who has for years been trying to make sure that nobody goes about “ inventing hot water ” especially now that a good part of legal regulations in serbia have been adjusted, not only in spirit but also in practice, to the eu norms. despite global economic crisis which shall obviously have much more severe consequences on the countries in transition than on the developed economies, our banking system is not only solvent ( capital adequacy ratio of 21 % ) but is also liquid as around rsd 120 billion is still invested in short - term securities of the nbs and rs. this means that money is plentiful but is more expensive now than it was a year ago. but what does “ expensive money ” means today? allow me to give some examples and then judge for yourselves whether money in serbia is “ expensive ” or not. the most recent issue of securities by the republic of greece, an eu member state, with euro as its legal tender, has the maturity of five years and pays interest of 5. 5 % p. a., and greece has an a - credit rating. poland, which also has