- Liberal entry of private sector and foreign banks. It is as a part of the reforms that today there are big private banks such as ICICI, HDFC, Axis and foreign banks such as the Citi group, HSBC, Barclays operating along with the public sector banks.
- Public sector were provided greater autonomy to function in a competitive environment and frame independent policies based on broad framework provided by
- Interest rates both the deposits as well as advances were de-regulated and each bank was free to decide on the interest rates it chose to offer including interest on savings account which until recently was regulated by RBI.
- Similarly, in respect of lending rates, banks were free to decide on the interest rate they would charge, they had to publish the lowest rate of interest they would charge to their best except that clients known as the benchmarked prime lending rate (BPLR). BPLR, however, lacked transparency as banks were lending even below BPLR known as sub BPLR lending. As a result, transmission of policy rate of RBI on lending by banks was diffused. To obviate this, RBI in 2010 has asked the banks to switch to base rate of interest, and that lending would not be done by banks, below their respective published base rate of interest, except DRI advances for weaker sector, loans against own deposits and loans to employees.
- Banking was made more transparent, stress on full disclosure of both the good and bad assets.
- There was a standardization and uniform income recognition, asset classification and provisioning norms for the banking sector. For the first time, a uniform definition was given to non-performing assets (NPAs) known as the 90 days norms. Thus, interest on loans provided if not received within the stipulated time would require to be classified as an NPA.
