Liberalisation, Privatisation And Globalisation — Economics STD 12 Humanities & Commerce — Question

Prior to 1991, banking institutions were subject to too much control by the RBI through high bank rate, high cash reserve ratio and statutory liquidity ratio.Financial sector includes:

1. banking and non-banking financial’institutions.
2. stock exchange market.
3. foreign exchange market.

In India, financial sector is regulated and controlled by the RBI (Reserve Bank of India). There was a substantial shift in role of the RBI from ‘a regulator’ to ‘a facilitator’ of the financial sector. Earlier as a regulator, the RBI would itself fix interest rate structure for the commercial banks. After liberalisation in 1991, RBI as a facilitator would only facilitate free play of the market forces and leave it to the commercial banks to decide their interest rate structure.