Balance of Payment Crisis (1991)

India had started facing the Balance of Payments (BoP) issue by the year 1985. The country was trapped in a serious economic crisis towards the end of 1990. The central bank i.e the Reserve Bank of India (RBI) had denied to issue new credit. The reserves of foreign exchange had diminished to a point where it could not finance more than 3 weeks of import. This situation led to the government airlifting the gold reserves of the nation to the International Monetary Fund (IMF) as a pledge in return for a loan which could be utilised to pay off the BoP debts.