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First Narasimham Committee

2011- 04- 21 10:04:17 GKToday
The most important committee was Narasimham Committee on banking Sector Reforms. It
was set up in 1991.
Please note that there were two Narasimham Committees.
Narasimham Committee I was formed in 1991 and Narasimham Committee II was
formed in 1998 and both were related to Banking Sector Reforms.
First Narasimham committee submitted its report in November 1991. It recommended the
following:
Reduction in the Statutory Liquidity Ratio
Reduction in the Cash Reserve Ratio
Interest rate in CRR Balances
Redefining the priority sector
Deregulation of the Interest Rates.
Asset Classification and defining the Non Performing Assets.
Improve transparency in the banking system
Tribunals for recovery of Loans.
Tackling doubtful debts
Restructuring the banks
Allow entry of the new private Banks
Please note these memorable Points:
The Narasimham Committee had recommended that the SLR should be reduced to
25% over the period of time.
The Narasimham Commit t ee recommended that CRR should be reduced to 10%
over the period of time.
The impact of reducing the CRR and SLR was that now more funds of the banks
could be deployed to some more remunerative loan assets.
The Narasimham Committee recommended that the Priority sector should be
redefined and it should include the following:
Marginal farmers
Tiny sector
Small business and transport operators
Village and Cottage Industries
Narasimham Committee recommended that there should be a target of 10% of the
aggregate credit fixed for the Priority Sector at least. (discussed later)
The result of the Narasimham committee led to some milestones in the banking
sector reforms in India.