The development of financial markets in India encompassed the introduction of new market segments, new instruments and a sharper focus on regulatory oversight. The Indian money market was fairly underdeveloped till the mid-1980s; dominated by the overnight segment with a narrow base, limited number of participants and administered interest rates since December 1973.
In 1987, participation was widened on the lending side and institutions were set up as market makers for the orderly development of the market. Select institutions were allowed to borrow from the money market on a term basis and the ceiling on interest rates was withdrawn in 1989.