It mainly consisted of uncollateralised call market, treasury bills, commercial bills and participation certificates. Following the recommendations of the Chakravarty Committee (1985), the Reserve Bank adopted a monetary targeting framework. At the same time, efforts were made to develop the money market following the recommendations of Vaghul Committee (1987).
In this regard, important developments were: (i) setting up of the Discount and Finance House of India (DFHI) in 1988 to impart liquidity to money market instruments and help the development of secondary markets in such instruments; (ii) introduction of instruments such as certificate of deposits (CDs) in 1989 and commercial papers in 1990 and inter-bank participation certificates with and without risk in 1988 to increase the range of instruments; and (iii) freeing of call money rates by May 1989 to enable price discovery.