CA Foundation · Business Economics · Indian Economy
Which of the following is a financial sector reform associated with the post-1991 period in India?
Granting licences to new private sector banks and reducing SLR and CRR was a financial sector reform after 1991, following the Narasimham Committee. It increased competition and freed more bank funds for lending. Higher ratios, fixed interest rates and nationalisation belong to the earlier controlled regime.
- ARaising the Statutory Liquidity Ratio and CRR to very high levels
- BGranting licences to new private sector banks and reducing the SLR and CRRCorrect
- CNationalisation of all insurance companies
- DFixing interest rates on all deposits and loans by the government
Explanation
Following the Narasimham Committee recommendations, reforms allowed new private sector banks and progressively lowered SLR and CRR, with interest rates being deregulated. Raising ratios, fixing all rates or nationalising insurance reflect the earlier controlled regime, so they are wrong.
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