The reforms in the Banking Sector were done in two phases. The first phase of the reform focused on improving the policy framework, institutional framework and financial health. Policy Framework improvement which included deregulation of interest rates, reducing the Cash Reserve Ratio to the initial standard, phasing out Statutory Liquidity Ratio, widening the scope of priority sector lending by linking the lending rates to the size of advances. Institutional Framework improvement: this focused on recapitalization, strengthening the supervisory system and creating a competitive environment. To improve the financial soundness of the banking sector certain prudent norms were prescribed and steps were taken to re-duct the proportion of NPAs.