Solution

Prior to 1991, the RBI was in charge of overseeing and regulating all the banks and other financial organisations in India. Aside than controlling foreign exchange, the RBI also used to set interest rates, establish how much money banks should retain in reserves, and prioritise which industries should receive priority financing. However, everything changed after the New Industrial Policy was announced (NEP). The transformation of the RBI's function from regulator to facilitator of the financial industry was one of the main goals of the financial sector reforms. This suggests that the financial sector may be given more flexibility to decide on numerous issues without contacting the RBI.
Private sector banks were founded as a result of the reform initiatives. The ability to open additional branches and choose the interest rate to be charged on different types of deposits was granted to banks. Banks are now permitted to earn funds through the capital market from both within and outside of India. All of this has caused the financial sector to expand significantly.