Summary |
The financial sector prior to the 1990s was characterised by various unique features such as segmentation, underdevelopment, paucity of instruments; complex structure of interest rates, ensuing “cross subsidization” among borrowers and so on. The chief responsibility that the Indian financial system assumed in the pre-reform period was essentially to cater to the needs of planned development in a mixed-economy framework where the Government sector had a predominant role in economic activity. With the objective of kick starting economic growth the public sector of the country followed fiscal activism with floating long-gestation projects requiring long-term finance. The policies pursued did have many benefits, though such benefits came at a higher cost. The phase was characterised by significant branch expansion to mobilise savings and there was a visible increase in the flow of bank credit to important sectors like agriculture, small-scale industries, and exports. However, these achievements co-existed with emergence of macro-economic imbalances such as persistent fiscal deficit and inefficient functioning of the financial sector. Excessive concentration of financial resources was contained to a significant extent. Importantly, there was no major episode of failure of financial intermediaries in this period. The financial sector reforms as a part of the general economic reforms focusing on privatization and liberalization have empowered the sector and brought a resurgence. In the light of this, the present book devotes a special section to the contributions of the research scholars in the field of financial sector pertaining to its growth, reforms and the impact of various policy changes.
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