Till early 1990s the Indian financial sector experienced "financial repression". The banking system was characterized by extensive regulations such as administered interest rates, directed credit programmes and strict prudential norms. Intermediation through securities markets was not popular due to lack of appropriate institutional arrangements and market microstructure. Pricing of initial and follow-on public offers were not determined by market. Financial sector reforms initiated in the early 1990s have attempted to overcome these weaknesses in order to enhance efficiency of resource allocation in the economy. Though the theoretical relationship between financial liberalization and economic growth has been well examined around the world providing contrasting results, the mechanisms through which the beneficial impacts of liberalization are realised (the major one being improving the efficiency in allocation of funds) have not been examined extensively. Infact, in Indian context this type of studies are very few in number and they also have certain limitations.