Since July 1974, the adhoc Treasury bills were offered at off-market discount rate of 4.6 per cent which was less than half of the prevailing market rates. There were two immediate consequences.
One, when large government deficits were monetised, there was excess liquidity in the system, which prompted the monetary authorities to increase the cash reserve ratio (CRR) for banks at regular intervals with a view to mop up the excess liquidity.