Which of the following issues were addressed by Narasimham committee? 2 lakhs has been fully decontrolled. Bank Details: It is better known as the Banking Sector Committee. This is necessary as greater volatility in exchange markets and greater use of interest rate as an instrument of monetary policy have made the market or asset price risk of foreign assets and domestic investments “considerable”. The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved … Recommendations of Narasimhan Committee 1. While attaining strong fundamental commercial viability, banker’s performance cannot be reflected by the number of branches and the volume of deposits and credits rather it is depending on organisational efficiency. History rrb. The restructuring process of the banking sector will remain incomplete unless other wings of the banking sector comprised of regional rural banks (RRBs) and co-operative banks are also included in this process. Regional Rural Banks were set up on the basis of the recommendations of the Narasimham Working Group (1975), and after the legislations of the Regional Rural Banks Act, 1976. The Pre-Independence Phase i.e. RRB issue during the late 1980s. The first one set up in 1991 by the then Finance Minister Mr. Manmohan Singh went into all aspects of financial sector while the second one looked specifically at the banking sector. The Working Group led by Khan has also mooted an idea to merge the banks and DFIs as well. This is subject to the provision that the holding of Central Government would not fall below 51% of paid-up-capital. Regional Rural Banks were established under the provisions of an Ordinance passed on 26 September 1975 and the RRB Act 1987 to provide sufficient banking and credit facility for agriculture and other rural sectors.As a result, Five Regional Rural Banks were set up on 2 October 1975,Gandhi Jayanti. 6.    Proper classification of assets and full disclosure of accounts of banks and financial institutions. Prudential norms have been started by RBI in order to impart professionalism in commercial banks. This committee was set up under the chairmanship of Narasimham with the name “Committee on Banking Sector Reforms” which is also known as “Second Narasimham Committee”. Therefore, the un-remunerative branches have to be closed down so that the precious resources of the banking sector would not be wasted unnecessarily to maintain the existence of those un-remunerative banks like a monument and the social role of the banking sector can be performed effectively with these resources. Content Filtration 6. To promote the healthy development of the financial sector, the Narasimhan committee made recommendations. The rate of Interest on bank loans above Rs. Based on the recommendations of the Narasimham Committee Report (1992), reforms were initiated in 1993 with a view to improve the financial health and operational viability of RRBs. Thus it favoured merger of strong banks as this would have a “multiplier effect” on industry. Thus the second report submitted by Narasimham Committee has touched many new areas of banking sector for their necessary reform although in some areas the Committee’s recommendations were almost identical to the one it had submitted in its first report in 1991. Finally, the financial system must maintain the principle that the provider is responsible for sale of suitable financial services to customers and ensure that providers are incentivised to make every effort to offer customers only welfare-enhancing products and not offer those that are not. The Committee also called for far reaching financial sector reforms. ANSWER: Narasimham Committee. This has led to increased competition. Dr.Vyas Committee, 2004--Advisory Committee on Flow of Credit to Agriculture and Related Activities. Explanation: 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. have evoked stiff resistance from trade unions of bank employees—but it these are implemented with caution, they are bound to change the lot of the banking sector favorably. The Committee suggests that pending the emergence of markets in India where market risks can be covered, it would be desirable Regional Rural Banks (RRBs) are financial institutions which ensure adequate credit for agriculture and other rural sectors . At the same time, it argued against the merger of strong banks with the weak as it has negative impact on the asset quality of the stronger bank because of the “Contaminated portfolio” of the weak bank. Narasimham Committee Report Some Further Ramifications and Suggestions Abstract This paper while agreeing with the general thrust of the Narasimham Committee Report, calls attention to some logical corollaries of the Report and analyses some possible fallout from implementing the Report. ADVERTISEMENTS: Highlights of Narasimham Committee Recommendations on Banking Reforms in India! First Report by Narasimham Committee (1991) Narasimham Committee I was a nine-member committee set up by the Government of India on 14 August 1991. The Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households, set up by the RBI in September 2013, was mandated with the task of framing a clear and detailed vision for financial inclusion and financial deepening in India. The Committee argued in favour of mergers among the strong banks for strengthening of these units and also to pave the way for greater opportunities, for competition. Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University. Among all the banks with large NPAs, the State Bank of India group was at the top with NPAs worth Rs 14,367 crore and the others maintained the level of NPAs to the extent of Rs 29,207 crore. Success of the second phase of reforms depends mainly on the organisational effectiveness of banks to be initiated by banks themselves. By ACADEMIC MANTRA 14,477 views 24:07 Thus some of the recommendations of the Narasimham Committee’s second report such as closure of weak banks, merger of strong public sector banks, substantial dilution of the government stakes in nationalized banks etc. The Committee submitted its … Khan recommended a progressive step in the direction of universal banking and suggested to develop a regulatory framework for achieving the said objective. before 1947 2. The Committee expressed concern over the rising non-performing assets of banks. The Wholesale Consumer Banks and Wholesale Investment Banks would not take retail deposits but would instead focus their attention on expanding the penetration of credit services. Tandon Committee: Following up for credit: 28: UK Sharma Committee: For NABARD’s Role In RRB: 29: Narasimham Committee: For reforms related to Banking Sector: 30: Naresh Chandra committee: Forming a 14 member task force on various issues of security: 31: Kelkar Committee Reforming the Tax Structure: 32: Parthasarathi Shome Committee By 1993, 172 of the 196 RRBs were recorded unprofitable. Himanshu Arora Apart from these major recommendations, the committee has also recommended faster computerization, technology up gradation, training of staff, depoliticizing of banks, professionalism in banking, reviewing bank recruitment, etc. GK, General Studies, Optional notes for UPSC, IAS, Banking, Civil Services. Narasimham Committee I was a nine-member committee set up by the Government of India on 14 August 1991. The Major Challenges to Regional Rural Banks ( RRBs) Is to Provide Basic Banking Services to Rural and Sub Urban areas of Various States of India, But RRBs In India Can Expand Their Operations In Urban Areas Too. 172 of the 196 RRBs This has left more funds with banks for allocation to agriculture, industry, trade etc. Besides, the third set of local banks has been suggested so as to cater to the requirements of small enterprises. It covers various issues like bank mergers, recasting of bank boards, changing rules, and more… 1. 4.    Phased achievement of 8% capital adequacy ratio. Disclaimer 8. Narasimham Committee I-1991 ‘The Committee on Financial System ’ was constituted by the Government of India, under the Chairmanship of Mr. M Narasimham, former Governor of RBI in 1991. the resources of the banks should be deployed in a most rational manner so that it can provide maximum benefit to its depositors. More Freedom to Banks : In order to tone up the working of the banks, the Narasimham committee (1991) recommended that; Each bank should be free and autonomous. Answering this question is a difficult task and only time can show the path in right direction.  Banking Reform Measures of Government: –, On the recommendations of Narasimhan Committee, following measures were undertaken by government since 1991: –, 3.    Capital Adequacy Norms (CAN): –, 6.    Competition from New Private Sector Banks. Practice Free General knowledge Questions & Answers for Railways RRB Exams. 172 of the 196 RRBs were recorded unprofitable with an aggregate loan recovery performance of … It was told to review the banking reform progress and design a programme for further strengthening the financial system of India. Recommendations of Narsimham Committee on RRBs The Narsimham Committee in 1990s also reiterated that the RRBs should be merged with the sponsor banks. Capital Adequacy ratio is the ratio of minimum capital to risk asset ratio. on Banking Sector Reforms in India: Narasimhan Committee 1&2, Nachiket Mor Committee, P J Nayak Committee, Statutory Bodies: Establishment, Functions, Examples, Problem of Non Performing Assets in India. Recommendations of regional basis to amagmation - by purwar committee RRB re organisation bill -2013 for 1975 passed in loksabha Economics, Indian Economy, Banking, Banking Reforms, Narasimham Committee Report. The east-Asian countries facing crisis are presently grappling with the problem to manage their over-sized banks. Thus, the recommendations of the Committee seek to encourage partnerships between specialists, instead of focussing only on the large generalist institutions. https://comtday.blogspot.com/2009/04/indian-rural-banking-emerging-trends.html A/C Name: APEIROGON TECHNOLOGIES PVT. The Narasimham Committee on banking sector reforms favoured the merger of strong public sector banks and closure of some weaker banks if their rehabilitation was not possible. The Narasimhan Committee advocated that interest rates should be allowed to be determined by market forces. Recommendations of regional basis to amagmation - by purwar committee RRB re organisation bill -2013 for 1975 passed in loksabha INTRODUCTION The 1st Narasimham Committee was set up by Manmohan Singh as India’s Finance Minister on 14th August 1991 A nine member committee was set up under the chairmanship of M. Narasimham, a former Governor of Reserve Bank of India The Committee submitted its Report to the Finance Minister NARASIMHAM in November 1991 COMMITTEE REPORT - I Copyright 10. Narasimham Committee Report II - 1998. In order to improve the performance of the banking system, the Narasimham Committee in its second report has suggested for creation of Asset Reconstruction Fund (ARF) so as to reduce the high level of NPAs, impairing the viability as well as working of the public sector banks. Although there is some degree of justification to build up an Indian mega bank to play a major role in international market and to maintain other two sets of banking set up in the national market but in the context of developments in the global financial sector, a fresh restructuring of the entire banking industry through merger of stronger banks in India may not be done hastily which needs further testing and consideration. The Committee which submitted its voluminous report to the Finance Minister Mr. Yashwant Sinha of the BJP-led government on 23rd April, 1998, had called for banking sector mergers and acquisitions and had observed that the central Bank’s role should be separated from being monetary authority to that of regulator of the banking sector. But too much delay in taking such policy decisions would jeopardies the viability of the entire banking sector. The paid up capital which was ` 25 Lakh at that time was not able to absorb the loan losses of most of the RRBs. Building such a system constituted the unfinished agenda of financial sector reforms of which the banking sector accounted for 80 per cent of the funds. Según el Comité, el sistema financiero tiene un papel crucial que desempeñar en la movilización de ahorros y su uso productivo mediante una asignación eficiente. Narasimham, Chairman, submitted the report of the Committee on Banking Sector Reforms (Committee-II) to the Finance Minister Yashwant Sinha in April 1998. The committee observed that the system is “costly and over time, not a sustainable option”. 5.    Abolition of branch licensing policy. 8.    Delegation of direct lending activity of IDBI to a separate corporate body. In 1996, RBI issued guidelines for setting up of Local Area Banks, and it gave Its approval for setting up of 7 LABs in private sector. The banks are also permitted to close non-viable branches other than in rural areas. Recommendations of Narasimham Committee on the Banking System: The Narasimham Committee’s recommendations for reforming the banking system are based on the sole rational criteria, i.e. In 1998 the government appointed yet another committee under the chairmanship of Mr. Narsimham. Committee on Banking Sector Reforms (Narasimham Committee, 1998) : Banking system should be in a position to build a credit culture and discipline by equipping itself to identify the eligible clients, based on the prescribed norms, in the government sponsored schemes so that full responsibility for all aspects of credit decisions remains with it. It was told to review the banking reform progress and design a … Incorrect! 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. The Committee further observed that the developments in South East Asian nations underscored the importance of a strong domestic financial system. Narasimham Committee Report II - 1998. The prime lending rate of SBI and other banks on general advances of over Rs. The Cash Reserve Ratio (CRR) is the cash ratio of banks total deposits to be maintained with RBI. Narasimham Committee Report on Banking Reforms! The RRB is governed by a Board of Directors who exercises all the powers and discharges all the functions of RRB. The Committee on Financial Systems, (1991) (Narasimham Committee): The study has shown stress on the poor financial health of the RRBs to the exclusion of every other performance indicator. In 1998, Government of Indian constituted yet another committee under the leadership of M. Narasimham. First Committee, known as Narasimham Committee I, was appointed in August 1991, against the backdrop of the Balance of Payment Crisis. In addition to major structural changes in the banking sector, the Committee report envisaged infusion of capital to meet higher and unspecified levels of capital adequacy and reductions in the volume of targeted credit. LTD is the parent company of CIVILSDAILY IAS. Comité Narasimham y Reformas Bancarias! 1.    Establishment of 4 tier hierarchy for banking structure with 3 to 4 large banks (including SBI) at the top and at bottom rural banks engaged in agricultural activities. 2.    The supervisory functions over banks and financial institutions can be assigned to a quasi-autonomous body sponsored by RBI. The report suggested to keep the NPAs at the lower levels. The Committee suggests that pending the Banks are now required to assign capital for emergence of markets in India where market market risk. The interest rates on deposits and advances of all Co-operative banks have been deregulated subject to a minimum lending rate of 13%. In order to initiate the second stage of financial sector reforms, the then Finance Minister Mr. P. Chidambaram constituted the Committee on financial sector reforms headed by Mr. M. Narasimham, the former Governor of RBI. 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