Question : What was the main objective of financial sector reforms in the 1991 economic policy?
Option 1: Encouraging foreign direct investment (FDI)
Option 2: Strengthening the banking sector
Option 3: Promoting rural credit
Option 4: Controlling inflation
Correct Answer: Strengthening the banking sector
Solution : The correct answer is (b) Strengthening the banking sector.
The financial sector reforms in 1991 aimed to address the weaknesses and inefficiencies in the banking sector, which included the nationalization of banks and extensive government control. The reforms focused on liberalizing and deregulating the banking sector to encourage competition, improve efficiency, and strengthen the overall financial system. These measures included introducing prudential norms, enhancing transparency and disclosure requirements, encouraging the entry of private and foreign banks, and promoting the development of capital markets.
