The financial sector refers to
all the players of the financial market and its stakeholders. The financial sector cannot be free from restrictions and boundaries in terms of entry, existence, and exit from the sector. Thus, the concept of financial sector reform evolved and got popularized. Financial sector reform means gradual removal of entry and existence barriers for institutions in the financial sector. It is also about opening opportunities for all types of depository institutions and other non-depository financial institutions to the private sector. It is also about policy liberalization and easing the establishment, operation, and closing of these institutions with no or low hurdles and hassles. It also means competition, transparency, financial discipline, and support to the attainment of the economic development objectives.
Core Objectives of Financial Sector Reforms
To increase the return on investment ensuring accelerated growth of the real sector of the economy
To create an efficient, competitive, and stable mechanism that could contribute remarkably towards the stimulation of economic growth
To relax rules and regulations regarding commencement and operation of financial and non-financial institutions in the economy
To increase transparency in the banking system through the introduction of potential norms and increase the role of market forces
To promote maintenance of financial stability even at the times of domestic as well as external sector shocks
Key Areas of Financial Sector Reforms
Banking Sector Reforms
Debt Market Reforms
Forex Market Reforms
Reforms in Other Segments
How Financial Sector Reform Began?
Deregulation of interest rates on deposits and lendings
Phasing out of margin rates
Statutory reserve requirements and targeted credit programs
Opening up of financial industry to the private sector, both domestic and foreign
