The Bank of Mauritius is the central bank. The Development Bank of Mauritius was established in March 1964 to provide loans for agricultural and industrial enterprises. There were 10 commercial banks operating in the country in 2002. Three were locally owned, including The Mauritius Commercial Bank Limited and the Sate Bank of Mauritius Limited, both of which dominated the market. The government-controlled Development Bank of Mauritius Limited provides loans to industry. The other seven banks are offshore, offering attractive tax rates, especially to US investment in India. Foreign exchange reserves at the Bank of Mauritius stood at $840 million in 1997, and were expected to reach $875 million by mid-1998. Total commercial bank assets were estimated at $3.4 billion.
The government made it clear early in the first quarter of 1997 that the Bank of Mauritius would intervene in the foreign exchange market in order to stabilize the value of the rupee. Interventions by the central bank helped the rupee to rebound after its decline against most foreign currencies, during the first nine months of 1996. In 1997, the Mauritian rupee was freely convertible.
The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $530.5 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $3.6 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 7.25%.
A market for securities or shares was not new to Mauritius when the Stock Exchange of Mauritius opened in 1989. Shares of companies had been traded in Mauritius in a market environment since the nineteenth century. The main difference between the market organized by Chambre de Courtiers de l'île Maurice and the market in its present form is the legal framework within which dealings in shares must now take place and the regular meetings for share dealing. The stock market was opened to foreigners in 1994. In 2001, the market had 40 listed companies, and a capitalization that grew from $55 million in 1989 to $1.8 billion in 1997, but then had declined to $1.1 billion by 2001.