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Financial sector reforms in India consist of?
1. Lowering down of CRR and SLR
2. Entry of private firms in Insurance sector
3. Deregulation of rate of interest
4. All of the above

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Correct Answer - Option 4 : All of the above

The correct answer is All of the above.

  • Financial sector reforms:
    • The Narasimham committee was established in August 1991 to give comprehensive recommendations on the financial sector of India including the capital market and banking sector.
    • The major recommendations made by the committee are:
      • To reduce the cash reserve ratio CRR and the statutory liquidity ratio SLR.
      • The committee recommended reducing CRR to 10% and SLR to 25% over the period of time.
      • Recommendations on priority sector lending- the committee recommended including marginal farmers, small businesses cottage industries, etc in the definition of priority sector.
      • The committee recommended fixing at least 10% of the credit for priority sector lending.
      • Deregulation of interest rates- the committee recommended deregulating the interest rates charged by the banks.
      • This was necessary to provide independence to the banks for setting the interest rates themselves for the customers.

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