Which sector saw the entry of new private Indian and foreign banks due to post-1991 reforms?
Show answer & explanation
Correct answer: B
Explanation
Solution: The correct answer is Banking.
Explanation:
☛ Following the economic crisis of 1991, India introduced comprehensive financial sector reforms based largely on the recommendations of the Narasimham Committee I (1991).
☛ One of the major objectives of these reforms was to create a vibrant, competitive, and efficient financial system in India.
☛ As part of these reforms, the Reserve Bank of India (RBI) issued guidelines in 1993 that allowed the entry of new private sector banks and permitted greater expansion of foreign banks.
☛ This deregulation led to the establishment of prominent private banks such as HDFC Bank, ICICI Bank, Axis Bank (formerly UTI Bank), and IndusInd Bank.
Extra Exam-Relevant Facts:
☛ Narasimham Committee: Appointed in August 1991 under the chairmanship of former RBI Governor M. Narasimham to recommend reforms for the financial and banking sector.
☛ Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR): Post-1991 reforms focused on reducing high SLR and CRR to leave more lendable funds with commercial banks.
☛ Textile Sector: Did not involve the entry of commercial banks; was addressed through schemes like the Technology Upgradation Fund Scheme (TUFS) in 1999.
☛ Railways: Remained predominantly a public sector monopoly reserved under government control after the 1991 industrial policy.
☛ Mining Sector: Gradually opened up to private investment through the National Mineral Policy of 1993.
Important One-Liners for Upcoming Exams:
☛ Which committee was formed in 1991 to recommend financial system reforms in India? → M. Narasimham Committee
☛ In which year did the Reserve Bank of India release guidelines for the entry of new private sector banks? → January 1993
☛ What was the primary goal of the New Industrial Policy introduced in 1991? → Liberalisation, Privatisation, and Globalisation (LPG reforms)
☛ How many industries were initially reserved exclusively for the public sector under the 1991 Industrial Policy? → 8 industries
☛ Which was the first new private sector bank to receive a licence from the RBI in the post-1991 period? → UTI Bank (later renamed Axis Bank)