Question

Which of the following factors led RBI to change its role from the controller to facilitator of the financial sector in India? 

Options

• With the economic liberalisation and financial sector reforms, RBI needed to shift its role from a controller to a facilitator of the financial sector.

• financial organisations were free to make their own decisions on many matters without consulting the RBI.

• The main objective behind the financial reforms was to encourage. private sector participation, increase competition, and allow market forces to operate in the financial sector. 

• All of the above

Answer 1

All of the above

Explanation:

Prior to liberalisation, the Reserve Bank of India (RBI) regulated and controlled the financial industry, which included commercial banks, investment banks, stock exchange activities, and the foreign currency market. RBI has to change its function from controller to facilitator of the financial industry as a result of economic liberalisation and financial sector reforms. This means that financial institutions were free to make choices on a variety of issues without consulting the RBI. This allowed private players access to the financial sector. The financial reforms were designed to foster private sector participation, increase competition, and allow market forces to function in the banking sector. Thus, prior to liberalisation, the RBI was in charge of the financial sector's operations, however, after liberalisation, the RBI was no longer in charge.