During the first phase (1991–92 to 1997–98) of reforms, several mutually reinforcing measures were initiated with focus on strengthening the commercial banking sector by applying prudential norms, providing operational flexibility and functional autonomy as also strengthening of the supervisory practices.
The important measures undertaken during this period covered adoption of capital adequacy norms to strengthen the capital base of the banks, strengthening the IRAC (Income Recognition and Asset Classification) norms to enable realistic assessment of the asset quality of banks; phased reduction in the SLR and CRR to augment the lendable resources of banks; rationalization and gradual deregulation of interest rates for inducing competitiveness; permitting new players in the banking sector to enhance competition and granting greater flexibility in branch expansion.