Some of the salient aspects of the banking sector reforms in India are briefly enumerated here. First, the reform measures were initiated and sequenced to create an enabling environment for banks to overcome the external constraints – which related to administered interest rate regime, high levels of pre-emption through reserve requirements, and credit allocation to certain sectors.
The interest rates in the banking system have been largely deregulated except for a few categories, viz., savings deposit accounts, non-resident Indian (NRI) deposits, small loans up to rupees two hundred thousand and export credit. However, the administered interest rates prevail in small savings schemes of the Government.