The recommendations of Narsimhan Committee regarding the banking sector in India
On 14 August 1991, the government of India constituted a nine member committee under the chairmanship of Mr. M Narasimhan a retired RBI Governor for making recommendations on existing financial system and to give suggestions for improving the existing structure. Some of the recommendations are as below: • Recommend a stronger banking system in the country especially in the content of capital account convertibility (CAC) which would involve large inflows and outflows of capital and consequent complications for exchange role management and domestic liquidity. For this purpose committee recommended the merger of strong banks which will have a multiplier effect on industry. • The setting up of small local banks. • Branch licensing system for opening new bank branches should be abolished. • The setting up of an Asset Reconstruction Fund (ARF) to take over the bad debts of the banks. • Bank should be given more autonomy and the directed credit should be abolished. • Th...