For substandard and” doubtful advances of Rs.25,000 and above, they are required to make 100 per cent provision with regard to loss assets. First, the State Bank of India Act was amended to enable the Bank to have access to the capital market. (ix) Supervision system of the RBI is being strengthened with establishment of new board for Financial Bank Supervision within the RBI. The Committee suggests that pending the Banks are now required to assign capital for emergence of markets in India where market market risk. Content Filtration 6. 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. It focused on issues like the size of banks and capital adequacy ratio among other things. They are also permitted to close non-viable branches except in rural and semi-urban areas. Such tribunals have been set up at major centres. To recover bad debts, a new Act known as the “Recovery of Debts due to Banks and Financial Institutions Act, 1993” has been passed to set up Debt Recovery Tribunals. Narasimham Committee has also proposed that well managed non-banking financial intermediates and merchant bank should also be allowed to operate in the money market. Ten Ombudsmen are functioning at important centres in the country. The RBI issued in January 2001 guidelines for the entry of new private sector banks other than 10 previous banks. During 1993-94, the Government provided Rs.5,700 crores towards recapitalisation of 19 nationalised banks; during 1994-95 Rs.5,293 crores to 13 banks; Rs.850 crores to 6 banks; during 1995-96 and Rs.909 crores to 4 banks during 1996-97; and Rs.297 crores to one bank in 1999-2000. They can invest in corporate shares, debentures and units of mutual funds, not exceeding 5 per cent of their outstanding advances effective March 2001. The RBI shareholding in SBI has been reduced to 67 per cent. By March, 1996 out of 27 public sector banks 19 banks (including SBI and all its subsidiaries) have attained 8 percent CRAR norm. Maidavolu Narasimham (born 1927) was the thirteenth governor of the Reserve Bank of India (RBI) from 2 May 1977 to 30 November 1977. Stronger Banking System : Narasimham Committee has made out a strong case for a stronger banking system in the country. (iv) New prudential norms for income recognition, classification of assets and provisioning of bad debts introduced in 1992. The report of. Banks have been permitted to leave the consortium after two years of joining it. 15000 crore till 1994-95. To encourage competition and slow-down disintermediation, lending restrictions on banks have been reduced. (iv) Interest rates to be deregulated to reflect emerging market conditions. In case of foreign banks, all of them have already attained these norms. With another amendment in 2000. The Narasimham Committee recommendations were forward-looking and are still relevant. (x) Government should indicate that there would be no further nationalisation of banks, the new banks in the private sector should be welcome subject to normal requirements of the RBI, branch licensing should be abolished and policy towards foreign banks should be more liberal. The BFS has been set up within the RBI in November, 1994. 2. Capital Adequacy Norms 2. (i) Statutory Liquidity Ratio (SLR) on incremental Net Domestic and Time Liabilities (NDTL) reduced from 38.5 percent in 1991-92 to 28 percent by December 1996. The important features of the first generation of Reform were. A Department of Supervision has been set up in the RBI with effect from 22 December 1993 to supervise the working of commercial banks. (x) Banks given freedom to open new branches and upgrade extension counters on attaining capital adequacy norms and prudential accounting standards. (xi) Quality of control over the banking system by the RBI and the Banking Division or the Ministry of Finance should be ended and the RBI should be made primary agency for regulation of banking system. Ifølge udvalget har det finansielle system en afgørende rolle at spille i mobiliseringen af besparelser og deres produktive brug ved effektiv tildeling. Recovery of Debts 6. Terms of Service 7. 5. 1 Committee on Banking Sector Reforms (Narasimham Committee II) - Action taken on the recommendations Recommendation Action Taken Measures to strengthen the banking system: Capital Adequacy: 1. Eleven Ombudsmen already functioning out of a total of 15 to expedite inexpensive resolution of customers’ complaints. The following points highlight the eighteen main suggestions of the Narasimham Committee. Financial Sector Reforms. (xiv) Under the Banking Ombudsmen Scheme 1995. The Board is to scrutinize banking transactions referred to it and give its opinion within 3 months as to whether there is sufficient basis for proceeding with criminal investigations against the officials. Disclaimer 9. To enforce payments discipline among borrowers, a scheme for disclosure of information regarding defaulting borrowers of banks with outstandingââ¬â¢s aggregating to Rs.1 crore and above as on 31 March and 30 September every year has been in operation since April, 1994. The Narasimham committee, 1991 has suggested the following market structure for the Indian banking sector during the post reform era: Three or four large bank should try to acquire multinational character by starting overseas business. NARASIMHAM COMMITTEE II â1998 (COMMITTEE ON BANKING SECTOR REFORMS) 11. The Finance Ministry has set up the CBBF in January, 1997 to advise it on the merits of the cases being pursued by the CBI against bank officials up to the level of the general manager. The Committee submitted its report to the Government on November 16, 1991. (viii) Changes be introduced in the bank structure 3-4 large banks with international character, 8- 10 national banks with branches throughout the country, local banks confined to specific region of the country, rural banks confined to rural areas. He hails from Mydavolu village of Guntur District in Andhra Pradesh. Highlights of Narasimham Committee Recommendations on Banking Reforms in India! The main recommendations of Narasimham Committee (1991) on the Financial (Banking) System are as follows; ADVERTISEMENTS: (i) Statutory Liquidity Ratio (SLR) is brought down in a phased manner to 25 percent (the minimum prescribed under the law) over a period of about five years [â¦] They are permitted to close non-viable branches other than in rural areas. (viii) Existing private sector banks given signal for expansion, more private sector banks allowed to set up branches provided they confirms to the RBI guidelines. The committee made several recommendations for the development of the money market. Some of the suggestions are: 1. (ix) Greater emphasis is laid on internal audit and internal inspection in the banks. Copyright 10. Permission to Foreign Institutional Investors (FII): This can be especially in the context of capital account convertibility (CAC) which would involve large inflows and out flows of capital and consequent complications for exchange rate management and domestic liquidity. Copyright 10. This has been raised to 9 per cent from March 2000 for all banks. The RBI has introduced prudential accounting norms for banks since 1992-93. Disclaimer 8. It has been reduced to 33 per cent. ADVERTISEMENTS: Highlights of Narasimham Committee Recommendations on Banking Reforms in India! Prudential Accounting Norms 5. The Committee feels that this is an extremely critical area and arrangements similar to the Advisory Board for Bank Frauds be made for various levels of staff of banks. 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