Despite deregulation of the financial markets such as liberalization of foreign bank entry and branching, the government continues to directly intervene in the credit markets through several special credit programs. In the effort to restructure the economy, the government has availed the assistance of multilateral lending institutions, which had required the pursuit of a number of credit programs, which is commonly known as policy-based lending programs. This paper reviews and examines its special features, its policy conditionality and its impact on various players in credit markets.