, pds should reduce and in fact consider eliminating their access to the call money market. there is an opinion that such restrictions of access to call money in indian conditions would add to stability in financial markets and help develop term money market. a final decision would no doubt be taken after discussions in technical advisory committee on financial markets of rbi, and further consultations with market participants. liquidity adjustment facility rbi influences liquidity on a day - to - day basis through laf and is using this facility as an effective flexible instrument for smoothening interest rates. the operations of non - bank participants including fis, mutual funds and insurance companies that were participating in the call / notice money market are in the process of being gradually reduced according to pre - set norms. such an ultimate goal of making a pure inter - bank call money market is linked to the operationalisation of ccil and attracting nonbanks also into an active repo market. the effectiveness of laf thus will be strengthened with a pure inter - bank call / notice money market in place coupled with growth of repo market for non - bank participants. the laf operations combined with judicious use of omos are expected to evolve into a principal operating procedure of monetary policy of rbi. to this end, rbi may have to reduce substantially the liquidity through refinance to banks and pds. for example, if rbi intends to tighten the money market conditions through laf, the automatic access of refinance facility from the rbi to banks and pds may reduce the effectiveness of such an action and thereby cause transmission losses of monetary policy. it may be appropriate to note that in most of the developed financial markets, the standing facilities operate at the margin. at present rbi provides standing facilities comprising the support available to banks under collateralized lending facility ( clf ) and export credit facility to banks, and liquidity support to pds. one way of reducing the standing facility will be to eliminate clf from the standing facilities and reducing the present ratio of normal and back - stop facilities. the existing methodology of calculating eligible export credit refinance continues till march 2002 and rbi has expressed its intention of moving away from sector specific refinance. as crr gets lowered and repo market develops, the refinance facilities should also be lowered giving more effectiveness to the conduct of monetary policy. towards international standards as part of the ongoing process of reforms, it is necessary to improve our standards, codes and practices in matters relating to financial system

generations. in the wholesale financial markets, a final consideration comes into play - typically a local " payment " is made in exchange for the " delivery " of a security, or of some foreign currency. not so long ago, there were often quite extensive delays between payment and delivery, implying significant risks for purchasers if the counterparty responsible for delivery failed in the interim. as i'll discuss more later, we have now moved to the happy position where most of these transactions can now be conducted on a simultaneous delivery - versus - payment ( dvp ) basis. there are two main lessons to draw out of these examples. first, the payment system is not a single entity. it is, in fact, quite a complex collection of disparate arrangements, with different participants, different rules, and different processes in each place. while there are similarities in the way things work internationally, each country also has its own idiosyncratic elements, reflecting its legal and banking history. the arrangements overlap and intersect at various points, and i have more than once heard them described as spaghetti. of course, there is nothing wrong with serving spaghetti as long as you know how to handle it. secondly, some of the key features i have described - in particular, the existence of sometimes - long pipelines between customers and banks, and the dependence on banks and their infrastructure providers - create risks for all the participants in the system, and those risks need to be understood and managed appropriately. i'm now going to talk about some of the significant changes in the payment system in recent years, and then about the various different roles that the reserve bank plays in this area, and how we go about some of them. i'll talk a bit too about the very successful risk - reduction programme that we have been pursuing. on the way, i'll have a few things to say about unfinished business and future business. recent innovations there have been some fairly dramatic changes to the payment system over the last 20 years. prior to about 1984, the system was almost entirely based on " paper ", with currency and cheques being the dominant forms of payment for both retail and wholesale transactions. the first credit cards were issued in 1979, but these were also paper - based initially. the electronic era began about 1984, when eftpos emerged in the market. new zealanders were enthusiastic adopters of eftpos, and new zealand was - and still is - a world leader in the penetration of