Question

Discuss any two objectives which were aimed at, by the introduction of Financial sector reforms by the Government of India during economic reforms of 1991.

Answer 1

1. Changing the Role of the Reserve Bank (RBI): The primary goal was to transform the RBI’s role from a regulator to a facilitator. This meant that, instead of the RBI controlling every aspect of banking (such as interest rates), banks were given greater autonomy to make their own financial decisions, encouraging a more market-driven environment.
2. Promoting Competition and Private Participation: The reforms aimed to open up the banking sector to private and foreign players. By allowing the establishment of private-sector banks and increasing the limit on Foreign Institutional Investment (FII), the government sought to introduce better technology, improved customer service, and greater efficiency through competition.