In an environment of rising importance of cross border capital flows, perceptions and expectations play major roles in shaping events and this consideration can be particularly heightened if the financial system is perceived to be weak and unsound. It is not surprising that financial reform initiatives globally have now moved to the strategic considerations of ensuring continued stability of the financial system.
In India, since the formal announcement of the first initiative of financial sector reform in the Union budget of 1991–92 to the Second Report of the Narasimham Committee in 1998, considerable ground has been covered in putting in place a financial system which can meet the requirements of a more competitive and open economy.