CBSE 2025, Compartment, Set 1

Question

"Economic reforms of 1991 changed the structure of the financial sector in India to a large extent."
Justify the given statement, highlighting any two reforms introduced in the financial sector.

Edvaya · Accepted Answer

The correct answer is Subjective. The financial sector in India witnessed a massive, structural revamp under the sweeping economic reforms of 1991. Two main, transformative measures were: 1. **Change in the Role of RBI:** The fundamental role of the Reserve Bank of India (RBI) was radically shifted from a strict "regulator" to a "facilitator" of the financial sector. This profound change meant that commercial banks and the financial sector were given the autonomy to make critical decisions on many financial matters independently, without needing constant prior consultation with the RBI. 2. **Entry of Private Sector Banks:** The policy changes definitively broke the public sector monopoly by allowing the establishment of private sector banks in India. This included both domestic Indian private banks and major foreign banks, which dramatically increased competition, efficiency, and customer service standards.

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Economics > Indian Economic Development > Economic Reforms 1991

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