Question

Which of the following committees examined and suggested financial sector reforms?
1. Abid Hussain Committee
2. Bhagwati Committee
3. Chelliah Committee
4. Narasimhan Committee

Answer 1

Correct Answer - Option 4 : Narasimhan Committee

The correct answer is Narasimhan Committee.

• The Narasimham Committee was established under former RBI Governor M. Narasimham in August 1991 to look into all aspects of the financial system in India.
• The committee is popularly known as the Committee on Banking Sector Reforms.
• The Committee in its second report submitted in 1998 suggests that with the emergence of markets in India where the market risks can be covered, it would be desirable that capital adequacy requirements take into account market risks in addition to the credit risks. 
• Key guidelines of the Narsimbham Committee report submitted in 1991 are:
  • Reduction in the SLR and CRR.
  • Phasing out Directed Credit Programme.
  • Interest Rate Determination.
  • Structural Reorganizations of the Banking sector.
  • Establishment of the ARF Tribunal.
• Major actions, taken as a result of the Narsimbham Committee report:
  • Some strong banks (such as SBI) were allowed to seek access to capital markets.
  • The SLR was brought down from 38.5% in 1991-1992 to some 28% by 1997. The CRR was also brought down from 14% to 10% by 1997.
  • Scheduled Commercial banks got the freedom to set interest rates on their deposits subject to minimum floor rates and maximum ceiling rates.
• Basic Information about Reserve Bank of India (RBI):
  • It is the regulator of the entire banking system in India.
  • Governor: Shaktikanta Das (25th governor). 
  • Founded: 1 April 1935 in Kolkata.
  • Headquarter: Mumbai.