Liberalisation of the financial sector was introduced to increase efficiency in the market and promote economic growth in developing countries. The IMF and the World Bank have often indicated that financial liberalisation is a central aspect of the economic integration into the world economy for emerging economies. McKinnon and Shaw (1973) prediction that artificially low interest rate and financial repression hinder economic growth was a departure from the financial policy practice by most developing countries. However, subsequent literature have broken down this theory and gone on to include a macroeconomic approach to the theory. The financial liberalisation of India was a gradual process, however amiss this was the Asia financial crises which took place between 1997and 1998.The BFS was introduced to supervise and inspect banks, financial institution (including development bank) and other non financial companies. Also introduced were the CAMELS and CACS for rating of banks in order to identify banks that need special supervisory attention
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