In April 1993, the Government of India appointed a committee under Chairmanship of R.N. Malhotra, former Governor of RBI, to look into the possibilities of reforms of the insurance sector. The committee submitted its report in January 1994 with a reform package containing wide ranging suggestions on both organisational and functional aspects of the insurance sector. Some of the important recommendations are:
- The private sector should be allowed to enter the insurance business,
- The proportion of LIC and GIC investments in Government securities should be reduced,
- Government stake in the LIC and GIC should be reduced through disinvestment.
A brief overview of the other financial institutions and the effects of financial liberalization on their workings suggest the following broad conclusions: Captive and subsidized sources of funds to almost all the all India development banks have been reduced and consequently they have been forced to turn to the market for funds. There has been a phased deregulation of interest rates.
SIDBI which lends and refinances loans that are exclusively made to the small scale sector continues to receive support from the Government of India and RBI in terms of subsidized credit. The refinancing operations of both SIDBI and IDBI have reduced substantially after 1990-1. The mutual funds business has been opened up for entry to private firms thus ending the monopoly position that UTI enjoyed. A comprehensive set of regulations regarding the organization and operations of mutual funds is now in place.
The insurance sector reform has begun with the opening of this sector to the private sector.
Revision in Policy Rates (per cent)
| Effective date | Repo rate | Reverse repo rate | CRR | SLR | MSF rate* | |
| 29 | Jan 2013 | 7.75 | 6.75 | 4.25 | 23.00 | 8.75 |
| 9 Feb 2013 | 7.75 | 6.75 | 4.0 | 23.00 | 8.75 | |
| 19 | Mar 2013 | 7.50 | 6.50 | 4.00 | 23.00 | 8.50 |
| 03 | May 2013 | 7.25 | 6.25 | 4.00 | 23.00 | 8.25 |
| 15 | July 2013 | 7.25 | 6.25 | 4.00 | 23.00 | 10.25 |
| 20 | Sept 2013 | 7.50 | 6.50 | 4.00 | 23.00 | 9.50 |
| 07 | Oct 2013 | 7.50 | 6.50 | 4.00 | 23.00 | 9.00 |
| 29 | Oct 2013 | 7.75 | 6.75 | 4.00 | 23.00 | 8.75 |
| 28 | Jan 2014 | 8.00 | 7.00 | 4.00 | 23.00 | 9.00 |
| 14 | June 2014 | 8.00 | 7.00 | 4.00 | 22.50 | 8.75 |
| 9 Aug 2014 | 8.00 | 7.00 | 4.00 | 22.00 | 8.75 | |
| 15 | Jan 2015 | 7.75 | 6.75 | 4.00 | 22.00 | 8.75 |
| 7 Feb 2015 | 7.75 | 6.75 | 4.00 | 21.50 | 8.75 | |
| 04 | Mar 2015 | 7.50 | 6.50 | 4.00 | 21.50 | 8.50 |
| 02 | June 2015 | 7.25 | 6.25 | 4.00 | 21.50 | 8.25 |
| 29 | Sept 2015 | 6.75 | 5.75 | 4.00 | 21.50 | 7.75 |
| 5 April 2016 | 6.50 | 6.00 | 4.00 | 21.50 | 7.00 | |
| 2 August 2017 | 6.00 | 5.75 | 4.00 | 20.00 | 6.25 | |
Measures of Money Supply and Liquidity Aggregates
Reserve Money (M0) = Currency in Circulation + Bankers’ deposits with the RBI + ‘Other’ deposits with the RBI.
Narrow Money (M1) = Currency with the Public + Demand Deposits with the Banking System + ‘Other’ Deposits with the RBI.
M2 = M1 + Savings Deposits of Post-office Savings Banks.
Broad Money (M3) = M1 + Time Deposits with the Banking System.
M4 = M3 + All deposits with Post Office Savings Banks (excluding National Savings Certificates).
While measures M0, M1 and M3 are widely used in India, M2 and M4 are rarely used. The RBI initiated publication of a new set of monetary and liquidity aggregates as per the recommendations of the Working Group on Money Supply analytics and Methodology of Compilation. Following the submission of its report in June 1998, while no changes were made in the definitions of M 0 and M1, new monetary aggregates
NM2 and NM3 as well as liquidity aggregates L1, L2, and L3 were introduced, the components of which are elaborated as follows.
NM1 = Currency with the Public + Demand Deposits with the Banking System + ‘Other’ Deposits with the RBI.
NM2 = NM1 + Short Term Time Deposits of Residents (including and up to the contractual maturity of one year).
NM3 = NM2 + Long-term Time Deposits of Residents + Call/ Term Funding from Financial Institutions.
L1 = NM3 + All Deposits with the Post Office Savings Banks (excluding National Savings Certificates).
L2 = L1 + Term deposits with Term Leading Institutions and Refinancing Institutions (FIs) + Term Borrowing by F Is + Certificates of Deposit issued by FIs.
L3 = L2 + Public Deposits of Non-banking Financial Companies. Data on M0 are published by the RBI on weekly basis, while those for M1 and M3 are available on fortnightly basis. Among liquidity aggregate, data on L1 and L2 are published monthly, while those for L3 are disseminated once in a quarter.
Last Modified: February 20, 2024