BIS Review 52/1997  -2-  5. One of the major objectives of financial sector reform has been to eliminate financial repression which is inherent in an administered interest rate structure and significant strides have been made in this direction. This process of change which began in late 1980s has not been abrupt but gradual.
During this period, considerable degree of freedom has been given to banks to determine both deposit and lending rates. Following moderation in the inflation rates in 1995-96 and 1996-97 and the reductions in cash reserve ratio, there has been a conspicuous reduction in both deposit rates and lending rates of banks as also spreads over the prime lending rates (PLR).