Financial sector and monetary policy: objectives and reforms  Till the early 1990s the Indian financial sector could be described as a classic example of “financial repression” a la McKinnon and Shaw. Monetary policy was subservient to the fisc.
The financial system was characterised by extensive regulations such as administered interest rates, directed credit programmes, weak banking structure, lack of proper accounting and risk management systems and lack of transparency in operations of major financial market participants (Mohan, 2004b). Such a system hindered efficient allocation of resources.