Under this framework, reserve money was used as operating target and broad money (M3) as an intermediate target. A number of money market instruments such as inter-bank participation certificates (IBPCs), certificates of deposit (CDs) and Commercial Paper (CP) were introduced based on the recommendations of Vaghul Committee (1987).
Fifth, structural reforms and financial liberalisation in the 1990s led to a shift in the financing paradigm for the government and commercial sectors with increasingly market-determined interest rates and exchange rate. By the second half of the 1990s, in its liquidity management operations, the RBI was able to move away from direct instruments to indirect market-based instruments.