Ex-RBI Governor M Narasimham Is No More
- Narasimham was known for being the chair of two high-powered committees on banking and financial sector reforms.
First Narasimham Committee Report: Presented in 1991.
- Recommended the creation of a four-tier banking structure with three large banks on top.
- Introduced the concept of rural-focused banks such as local area banks.
- Proposed a phased reduction in banks’ mandatory bond investment and cash reserve limits so that banks lend money for other productive needs of the economy.
- It introduced the concept of capital adequacy ratio and proposed the abolition of the branch licensing policy.
- Concepts of non-performing assets classification and full disclosure of accounts were also recommended by the first committee.
- Through reregulation of interest rates, it brought in greater competition among banks.
- The committee introduced the concept of an asset reconstruction fund to take over bad debts.
Second Narasimham Committee Report- 1998
- It is better known as the Banking Sector Committee.
- It was told to review the banking reform progress and design a programme for further strengthening the financial system of India.
- The committee focused on various areas such as capital adequacy, bank mergers, bank legislation, etc.
Source : The Hindu