With the objective of providing credit to the productive sectors of the economy, bank lending rates as well as the allocation of bank credit were closely regulated by the Reserve Bank till the late 1980s. Furthermore, there were a number of sector-specific, programmespecific and purpose-specific credit stipulations.
With the initiation of financial sector reforms in the early 1990s, various steps were taken to deregulate the lending rates of commercial banks. First, the credit limit size classes of scheduled commercial banks, on which administered rates were prescribed, were compressed into three slabs in April 1993.