The Reserve Bank of India has taken the following measures to implement the recommendation of the Working Group since 1987:

(i) With a view to make bill financing attractive to the borrowers, from April 1987, the effective interest rate on bill discounting for categories subject to the maximum lending rate has been fixed at a rate one percentage point lower than the maximum lending rate.

(ii) In order to attract additional funds into rediscount market, the ceiling on the bill rediscounting rate has been raised from 11.5% to 12.5%

(iii) Access to bill rediscounting market has been increased by selectively increasing the number of participants in the market.

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(iv) 182 Day Treasury Bills have been introduced in 1987. In 1992-93, 364 Day Treasury Bills were introduced and the auction of 182 Day Bill has been discontinued. Like 182-Day Treasury bills, 364 Day Bills can be held by commercial banks for meeting Statutory Ratio.

(v) In August 1989, the government remitted the duty on bills. This step removed a major administrative constraint in the use of bill system.

(vi) Total deregulation of money market interest rates with effect from May 1, 1989 is a significant step taken by RBI towards the activation of money market. Removing the interest ceiling on money rates would make them flexible and lend transparency to transactions in the money market.

(vii) Certificates of Deposits (CDs) were introduced in June 1989 to give investors greater flexibility in employment of their short-term funds.

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(viii) Another money market instrument, Commercial Paper (CP), was introduced in 1990-91 to provide flexibility to the borrowers rather than additionality of funds over and above the eligible credit limit.

(ix) Since July 1987, the Credit Authorisation Scheme (CAS) has been liberalised to allow for greater access to credit to meet genuine demand in production sectors without the prior sanction of the Reserve Bank.

(x) In April, the Discount and Finance House of Indian Limited (DFHI) was established with a view to increasing the liquidity of money market instruments.

(xi) In 1991, the scheduled commercial banks and their subsidiaries were permitted to set up Money Market Mutual Fund (MMMF) which would provide additional short-term avenue to investors and bring money market instruments with in the reach of individuals and small bodies.

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As a result of various measures taken by the RBI, the Indian money market has shown signs of notable development in many ways:

(i) It is becoming more and more organised and diversified.

(ii) The government trading in various instruments, like 364 Day treasury Bills, commercial bills and commercial paper, has increased considerably.

(iii) The volume of inter-bank call money, short notice money and term money transactions have grown significantly.

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(iv) At present, scheduled commercial banks, cooperative banks, Discount and Finance House of India (DFHI) are participating in the money market both as lenders and borrowers of short-term funds.

While Life Insurance Corporation of India (LIC), Unit Trust of India (UTI), General Insurance Corporation of India (GIC), Industrial Development Bank of India (IDBI) and National Bank for Agriculture and Rural Development (NABARD) are participating as lenders.