Write a note on narasimham committee report on banking sector reforms

Gross NPAs of all scheduled commercial banks shot up by Rs. The Government therefore, has to consider. Underlining the need for dealing with the issue of weak banks separately, it recommended that for potentially viable weak banks, corrective measures such as recapitalisation be undertaken but only for those banks, where early or complete correction was not possible, alternative approaches including closure be carefully examined.

There would then be only two forms of intermediaries, viz. Recruitment procedures, training and remuneration policies of public sector banks were recommended to be brought in line with the best-market-practices of professional bank management. Please see comments against item 1 above. The reforms also abolished the requirement that banks needed to obtain RBI approval for individual credit limits fixed for large customers.

Banking Sector Reforms in India: A Survey

New foreign banks were licensed to enter the market, and existing banks were allowed to expand branches more liberally. The Committee also recommends that a distinction be made between NPAs arising out of client specific and institution specific reasons and general agro-climatic and environmental issues factors.

At one stage, prior to the reforms, the combined effect of the high CRR and the SLR was such that only 35 percent of the increment in bank deposits was actually available for commercial advances, the rest being either impounded by the RBI in the form of cash reserve deposits or absorbed by the government.

Banking & Insurance

Supervision and Privatization of Banks The gradual privatization of public sector banks has been an important component of banking sector reforms in India.

As indicated against item 19 above, the disclosure requirements of banks have been strengthened. However, the privatization of public sector banks in India is not yielding the expected result.

Gross NPAs as a percent of total assets are much lower because Indian banks typically have a large proportion of their assets in sovereign debt; this ratio has also declined from 7 percent in — to 4 percent in — Any DFI, which wishes to do so, should have the option to transform into bank which it can exerciseprovided the prudential norms as applicable to banks are fully satisfied.

While there is much merit in an inter-bank reference rate like a LIBOR, such a reference rate would emerge as banks implement sound liquidity management facilities and the other suggestions made above are implemented.

Broad Approach to Reform The strategy for banking reforms was broadly similar to that followed in other countries, but with some important differences. Progress is also being made towards developing standards for newer payment instruments such as Smart Cards.

However, this is not so much due to the improvements brought about afteras the fact that the capital account was not fully open. The ILAF Interim Liquidity Adjustment Facility introduced earlier has served its purpose as a transitional measure for providing reasonable access to liquid funds at set rates of interest.

Secondly, NPAs are declining and profits of banks are rising. Increasing Competition Increasing competition within the banking sector was an integral part of the reforms as a means of promoting efficiency in the sector, and important steps were taken in this direction.

The first stage of reforms was shaped by the recommendations of the Committee on the Financial System Narasimham Committeewhich submitted its report in Decembersuggesting reforms in banking, the government debt market, the stock markets, and in insurance, all aimed at producing a more efficient financial sector.

Highlights of Narasimham Committee Recommendations on Banking Reforms in India

This would reduce the problem of vulnerability of chronic borrowers. Gross NPAs as proportion of total assets has declined from 1. It submitted its report to the Government in April with the following recommendations. It seems apparent that there are varying levels of overmanning in public sector banks.

A Committee on Banking Sector Reforms known as Narasimham Committee was set up by RBI to study the problems faced by Indian banking sector and to suggest measures revitalize the sector.

Narasimham Committee on Banking Sector Reforms () The purpose of the Narasimham-I Committee was to study all aspects relating to the structure, organization, functions and procedures of the financial systems and to recommend improvements in their efficiency and productivity.

The first stage of reforms was shaped by the recommendations of the Committee on the Financial System (Narasimham Committee), which submitted its report in Decembersuggesting reforms in banking, the government debt market, the stock markets, and in insurance, all aimed at producing a more efficient financial sector.

Narasimham Committee on Banking Sector Reforms () () report and the Narasimham Committee-II () Report. These recommendations not only helped unleash the potential of banking in India, they are also recognized as a factor towards minimizing the impact of global financial crisis starting in Unlike the socialist.

Banking Sector Reforms News. Nov, 12, [op-ed snap] Time for the government to reassess its position (Note: After using the PNB technology platform at the initial stage, IPPB is now looking for its own platform) The report of the first Narasimham committee set up in. The banking sector reforms also emphasized the need to review the manpower resources and rationalize the requirements by drawing a realistic plan so as to reduce the operating cost and improve the .

Write a note on narasimham committee report on banking sector reforms
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