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Understanding how financial institutions evolve is key to grasping the landscape of loans and interest rates today. This article delves into a historical overview of significant banking innovations and financial instruments introduced by banks, particularly focusing on developments in India, that aimed to enhance performance and diversify financial offerings. These innovations laid groundwork for modern lending practices, including various types of loans and interest rate structures.

What Are Participation Certificates and Inter-Bank Participations?

In April 1970, the Reserve Bank of India (RBI) introduced Participation Certificates (PCs) to mobilize funds, reduce options for the RBI, and diversify financial instruments. A PC allowed a bank to sell a portion or all of a loan it had made to a third party. PCs gained significant popularity in the late