Perhaps the single most important element of the financial sector reforms has been the
deregulation of interest rates.
• Interest rates were freed on corporate bonds, most bank lending, and on all bank term
deposits.
• Introduction of auctions coupled with reduced pre-emption led to more market determined
interest rates for government securities.
• Administered interest rates in the banking system are now confined mainly to the rate on
savings account, and the concessional lending rates for certain sectors like exports and
small loans. The interest rates on small savings instruments offered by the government are
also administered, and in a sense provide a floor for bank deposit rates. The government is
in the process of linking these rates also to market interest rates and inflation rates.
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