To what extent the Narasimhan committee on banking reforms has been implemented successfully in the country. Discuss (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· M Narasimham reports were seminal because they brought in all the global wisdom at a time when the internet was non-existent in India.
· Concepts as propounded by the Bank for International Settlements (BIS) regarding income recognition, capital adequacy.
· It may be recollected that RBI took time to bring the 90-day concept for recognising non-performing assets (NPAs).
· The concept of having more private banks, getting in new private banks has brought about a technology revolution in the banking sector, which has now permeated all banks, making the system globally comparable.
· The extended frame provided to foreign banks to operate in India, besides a firm signal that there would be no further nationalisation.
· The committee argued for sharp reductions in the CRR (Cash Reserve Ratio) and the SLR (Statutory Liquidity Ratio) of banks.
· Narasimham had spoken about creating a four-tiered structure of banks.
· Exposing the concept of evergreening is something that was brought to the table by the committee.
· It was dodging this rule and classifying NPAs as restructured assets which brought the system to an embarrassing situation when the asset quality review was undertaken in 2015.
· The identification of weak banks and putting conditions was again a concept from this book and hence the PCA (Prompt Corrective Action) policy of RBI has drawn from this chapter.
· The committee recommended introduction of transparency in bank accounts, all annual reports include all disclosures and follow fixed formats.
