It is useful to recall briefly the nature of the Indian Banking sector at the time of initiation of financial sector reforms in India in the early 1990’s . The Indian financial system in the pre-reform period (i.e. prior to Gulf crisis of 1991), essentially catered to the needs of planned development in a mixed economic framework where the public sector had a dominant role in economic activity .The strategy of planned economic development requires huge development expenditure which is met through Government dominance of ownership of banks, automatic monetization of fiscal deficit and subjecting the banking sector to large pre-emptions-both in terms of the statutory holding of Government securities (Statutory liquidity ratio or SLR) and cash reserve ratio (CRR).