Step 1: Objective 1 — Changing the Role of the Reserve Bank (RBI).
The primary goal was to transform the RBI's role from a regulator to a facilitator. This meant that instead of the RBI controlling every aspect of banking (like interest rates), banks were given more autonomy to make their own financial decisions, encouraging a more market-driven environment.
Step 2: Objective 2 — Promoting Competition and Private Participation.
The reforms aimed to open up the banking sector to private and foreign players. By allowing the establishment of private sector banks and increasing the limit of Foreign Institutional Investment (FII), the government sought to introduce better technology, improved customer service, and greater efficiency through competition.