Financial sector reforms along with Reserve Bank’s emphasis on development of various segments of financial market enabled shifts in operating procedures based on direct quantity-based instruments to indirect interest rate-based instruments. The Reserve Bank has been able to better transmit monetary policy signals in the money market through a single policy repo rate.
BIS central bankers’ speeches  11  Evidence so far suggests a significant improvement in monetary policy transmission under the new operating framework. In order to reinforce this process, I make three suggestions. First, there has been a swift transmission of policy rate at the short-end of money market, partly due to the prevalence of market liquidity in deficit mode.