- Before 1991, banks were unprofitable, inefficient, and unsound.
- This was due to stringent CRR/SLR, low interest rates on government bonds, and directed lending.
- LPG reforms aimed to strengthen the banking system.
- Banking sector was opened to private competition from new private banks.
- Several new banking licenses were granted.
- SEBI was established as an independent statutory authority for capital markets.
- Capital market was opened for portfolio investments.
- Indian companies could access international capital markets via GDRs.
- Government control over capital issues and pricing was abolished.
- These reforms aimed to improve efficiency and competition.