##es ) target overnight interest rate, there is also a preference for an interest rate corridor. literature on the central banks ’ own accounts in the industrial countries attribute five main reasons for reforms in their operating procedures during the 1980s and the 1990s. 2 – first, monetary policy instruments were changed to adapt to the new operational frameworks of the respective monetary authorities. – second, with financial deepening occurring more or less entirely outside the central banks ’ balance sheets, the share of the financial system over which monetary authorities had direct control was reduced, warranting indirect, price - oriented as opposed to quantity - oriented instruments, ways to control the non - monetary components of liquidity in the financial system. – third, in the wake of expansion, diversification and integration of financial markets and the narrowing of differentials between rates of return in different currencies, there was a need for instruments that could impart flexibility to liquidity management in terms of timing, magnitude and accuracy. – fourth, the growing importance of expectations in financial markets favoured the adoption of instruments that were better suited for signalling the stance of monetary policy. – fifth, there was a growing urge on the part of central banks to stimulate money market activity and improve monetary policy transmission while emphasising the separation of monetary and government debt management objectives. mehran h., laurens, b. and m. quintyn ( eds. ) ( 1996 ), interest rate liberalization and money market development : selected country experiences, washington, dc : international monetary fund. thus, during the 1990s there was continuous reduction in reserve requirements with increasing emphasis on active liquidity management accompanied by a greater transparency in the policy signals relating to desired interest rate levels. most central banks prefer open market operations ( omo ) as a tool of monetary policy, which allow them to adjust market liquidity and influence the term structure of interest rates. indian experience consistent with the objectives and policy framework, the operating procedure of monetary policy in india has also witnessed significant changes. the choice of targets, instruments and operating procedure was circumscribed to a large extent by the nature of the financial markets and the institutional arrangements. during the monetary targeting period ( 1985 – 1998 ), while m3 growth provided the nominal anchor, reserve money was used as the operating target and cash reserve ratio ( crr ) was used as the principal operating instrument. besides crr, in the pre - reform period prior to 1991, given the command and control nature of the economy, the reserve

report http : / / siteresources. worldbank. org / extglobalfinreport / resources / 8816096 – 1361888425203 / 9062080 – 1364927957721 / gfdr - 2014 _ complete _ report. pdf 2014. vivina vishwanathan, 10 changes payments banks may bring in, aug. 2015, published in the livemint http : / / www. livemint. com / money / 34xcrmghz4exlqvhabyllm / 10 - changespayments - banks - may - bring - in. html bis central bankers ’ speeches