Question

(i) 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.

Hint:

The financial sector reforms of 1991 aimed to liberalize markets and strengthen the banking sector to promote efficiency, growth, and financial stability.

Answer 1

Step 1: Objective 1 - Liberalization of Financial Markets.
One of the key objectives of financial sector reforms in 1991 was to liberalize and modernize the financial markets in India. This involved removing government controls over the financial markets, allowing private sector participation, and encouraging competition. The aim was to improve efficiency and better allocate resources, thereby promoting economic growth.
Step 2: Objective 2 - Strengthening the Banking Sector.
Another objective was to strengthen the banking sector. The reforms included measures like capital adequacy norms, improved supervisory mechanisms, and enhancing the operational efficiency of public sector banks. These reforms aimed to improve the financial health of banks and ensure their ability to withstand shocks.