* : Liquidity Adjustment Facility. After the adoption of the full-fledged LAF in June 2000, call rates, in general, witnessed a declining trend up to 2004-05. The institution of LAF has also enabled the Reserve Bank to manage liquidity more efficiently and reduce volatility in call rates.
Volatility, measured by the coefficient of variation (CV) of call rates, has declined significantly in the current decade as compared with that in the 1990s (Chart 2), with some increase in 2006-07, as already noted. 4  BIS Review 51/2007  The reduction in bid-ask spread in the overnight rates indicates that the Indian money market has become reasonably deep, vibrant and liquid.