NARISHMAM COMMITTEE ON BANKING SECTOR REFORMS

By

1991 -RBI proposed the committee chaired by M.Narasimham, former RBI Governor to review the Financial System Review- aspects relating to the Structure, Organization, Procedures and Functioning of the financial system Constituted in 1991, the Committee submitted two reports, in 1992 and 1998, which laid significant thrust on enhancing the efficiency and viability of the banking sector. The Narasimham Committee laid the foundation for the reformation of the Indian banking sector.

 Higher

rates of CRR(15%) and SLR(38.5%) credit programs

Directed Political

and Administrative interference of credit

Subsidizing Mounting

expenditures of banks

 Reduction

of Statutory Liquidity Ratio (SLR) to 25 per cent over a period of five years Progressive reduction in Cash Reserve Ratio (CRR) to 35% Phasing out of directed credit programmed and redefinition of the priority sector Stipulation of minimum capital adequacy ratio of 8 per cent by March 1996. (Capital adequacy ratios ("CAR") are a measure of the amount of a bank's capital expressed as a percentage of its risk weighted credit exposures.)
Adoption

of uniform accounting practices in regard to income recognition, asset classification and provisioning against bad and doubtful debts

 Setting

up of special tribunals to speed up the recovery process of loans Setting up of Asset Reconstruction Funds (ARFs) to take over from banks a portion of their bad and doubtful advances at a discount Abolition of branch licensing Liberalizing the policy with regard to allowing foreign banks to open offices in India Giving freedom to individual banks to recruit officers Revised procedure for selection of Chief Executives and Directors of Boards of public sector banks Speedy liberalization of capital market Enactment of a separate legislation providing appropriate legal framework for mutual funds and laying down prudential norms for such institutions, etc

 1998-

Finance minister appointed Mr. Narasimham as chairman of one more committee. committee was asked to review the progress of banking sector reforms to date and a programmed on financial sector reforms to strengthen India's financial system and make it internationally competitive. committee submitted its report to the government in April 1998. report covered issues like- capital adequacy, bank mergers, recasting bank board, and creation of global sized banks.

This

The

The

 Need

for stronger banking system with concept of narrow banking

Experiment Small

local banks Adequacy Ratio

Capital

Review and update banking laws

THANK U