These structural changes in the economy meant that the DFIs lost their competitive edge in the long term finance market and started facing challenges on solvency and liquidity fronts. The non-performing assets started to grow while the profitability subsided.
In a contemporaneous development, following liberalisation in the Indian Economy during the 1990s, there was an increasing clamour for reduced Government ownership and involvement in the financial institutions mainly from efficiency, accountability and moral hazard perspectives. I would return to some of the problems faced by the DFIs in India a little later in my address.