Ex-RBI Governor M Narasimham Is No More

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  • 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

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