Which of the following is incorrect with regard to the financial sector reforms taken under the purview of new economic policy, 1991?a)Role of RBI shifted from regulator to facilitator of financial institutions.b)Foreign investment limit in bankswas raised to around 70 percent.c)Foreign Institutional Investors (FIIs) are now allowed to invest in Indian financial markets.d)Banks can set up new branches without the approval of RBI provided they fulfil certain conditionsCorrect answer is option 'B'. Can you explain this answer?

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Which of the following is incorrect with regard to the financial sector reforms taken under the purview of new economic policy, 1991?

a)
Role of RBI shifted from regulator to facilitator of financial institutions.
b)
Foreign investment limit in bankswas raised to around 70 percent.
c)
Foreign Institutional Investors (FIIs) are now allowed to invest in Indian financial markets.
d)
Banks can set up new branches without the approval of RBI provided they fulfil certain conditions

Correct answer is option 'B'. Can you explain this answer?

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Foreign investment limit in banks was raised to around 50 per cent under the financial sector reform measures.

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Which of the following is incorrect with regard to the financial secto...

The incorrect statement among the given options is option 'B', which states that the foreign investment limit in banks was raised to around 70 percent. This statement is not accurate with regard to the financial sector reforms taken under the purview of the new economic policy of 1991.

Explanation:

1. Background on the new economic policy of 1991:
The new economic policy of 1991 was a set of economic reforms introduced by the Government of India to liberalize and open up the Indian economy. These reforms were aimed at promoting economic growth, attracting foreign investment, and integrating India into the global economy.

2. Role of RBI shifted from regulator to facilitator of financial institutions:
Under the new economic policy, the role of the Reserve Bank of India (RBI) was redefined. Instead of being solely a regulator of financial institutions, the RBI's role was shifted to that of a facilitator. This change aimed to create a more liberal and competitive financial sector.

3. Foreign institutional investors (FIIs) allowed to invest in Indian financial markets:
One of the key reforms introduced under the new economic policy was the permission granted to foreign institutional investors (FIIs) to invest in Indian financial markets. This move aimed to attract foreign capital and expertise into the Indian economy.

4. Banks can set up new branches without RBI approval:
Another significant reform introduced under the new economic policy was the relaxation of regulations regarding the establishment of new bank branches. Banks were allowed to set up new branches without seeking prior approval from the RBI, provided they fulfilled certain conditions. This reform aimed to promote competition and expansion in the banking sector.

5. Foreign investment limit in banks:
Contrary to option 'B', the foreign investment limit in banks was not raised to around 70 percent under the new economic policy. At that time, the foreign investment limit in private sector banks was set at 49 percent. It was only in 2015 that the foreign investment limit in private sector banks was raised to 74 percent.

In conclusion, option 'B' is incorrect because the foreign investment limit in banks was not raised to around 70 percent under the financial sector reforms of the new economic policy in 1991.

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